Energy Transition Handbook - Flipbook - Page 17
Energy Transition Handbook 2021
CBI certification is available for assets and projects
that meet the Standard requirements in, inter alia,
the solar, wind, geothermal, marine renewables
(including offshore wind and solar, wave and
tidal), water infrastructure, low carbon transport
and buildings sectors. Certification is allowed
prior to issuance, enabling the issuer to use the
Climate Bond Certification mark in marketing
efforts and investor roadshows.
New national green bonds developed in certain
other countries are largely aligned with the GBP
and the Standard, however developments in
China in particular suggest that, in such a rapidly
expanding market, there may be a need for greater
regulatory supervision.
Green loan standards:
The Loan Market Association’s Green Loan
Principles (LMA GLP) build on ICMA’s GBP and
aim to develop the integrity and consistency of the
green loan product.
The LMA GLP introduces self-certification by
borrowers that can demonstrate the internal
expertise to confirm alignment of the green loan
with the key features of the LMA GLP.
In collaboration with its US and Asian counterparts,
the LMA has also published an extended iteration
of the LMA GLP, providing a more in-depth
explanation on application to revolving credit
facilities (RCFs). The challenge is in identifying
the use of proceeds in an RCF, and parties should
determine how to evidence the flow of funds to a
sustainable objective when applying the LMA GLP.
Green horizons
Despite these relatively new market standards, the
world’s largest investors/lenders, central banks,
regulators and market organisations have called
for the development of new frameworks setting
out market terms and standards for green finance.
The U.S. Alliance for Sustainable Finance
(USASF), formed by 15 major financial
institutions, aims to provide the resources and
expertise to identify and streamline existing
climate-finance initiatives, encourage greater
transparency across climate-related financial risks
and opportunities and, ultimately, drive more
capital to sustainable investments.
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Similarly in Europe, in a drive to increase the
impact of green finance measures, the EU
Sustainable Finance Package has introduced
proposals on:
•
a unified EU classification system which can be
embedded into different areas of EU law and
which will facilitate development of standards,
labels and benchmarks;
•
rules on how investors integrate ESG factors in
investment decisions and greater transparency
relating to financial products which target
sustainable investments; and
•
a new category of benchmarks to facilitate a
green comparison across different investments.
As markets mature, green finance documentation
may move beyond a simple “use of proceeds”
requirement towards applying a tailored set of
specific contractual consequences, such as lock-up,
acceleration or a margin ratchet, in the event of a
borrower/issuer failure to meet or maintain identified
green eligibility criteria.
We are likely to see increasing convergence
between the dedicated market for green finance
and the broader ESG markets. “Greenwashing”
risk remains a hot topic and borrowers and lenders
should continue to ensure that their activities
in this space are genuine and capable of being
evidenced to the market and their stakeholders.
We have a market-leading Impact Financing
& Investing group with a long history of
collaborating with our clients on green
finance transactions that promote a positive
environmental impact.