Environmental bonds – often called ‘green bonds’ or ‘ESG bonds’ – are financial instruments that raise debt for investment in companies or projects that deliver environmental benefits.
© WWF / Elma Okic
Attractively simple financial solutions, environmental bonds offer investors financial returns and support investment in areas such as sustainable agriculture, clean energy, and conservation.
Creating a large, liquid market in green bonds offers a unique opportunity to boost the volume of debt capital available for green projects and, if well-designed, reduce the cost of debt for projects that drive the transition towards a nature-positive, net zero economy.
They can also help shape wider market interest in sustainable investment as investors and issuers pay more attention to ESG concerns, including climate- and nature-related financial risks.
Creating a large, liquid market in green bonds offers a unique opportunity to boost the volume of debt capital available for green projects and, if well-designed, reduce the cost of debt for projects that drive the transition towards a nature-positive, net zero economy.
They can also help shape wider market interest in sustainable investment as investors and issuers pay more attention to ESG concerns, including climate- and nature-related financial risks.
WWF Environmental Bonds Initiative
Robust global market standards for ‘green debt capital markets’
Between 2016 and 2022, WWF worked with standards-setters, regulators and capital markets to shape and nurture environmental standards for global debt capital markets. During that period international markets for so-called ‘green bonds’ grew substantially, both in quality and quantity.
Standards have moved from relatively lax process guidelines with a primary focus on climate to more prescriptive taxonomy-based standards with robust definitions, including specific criteria for biodiversity and ecosystems protection, including ‘do-no-significant harm criteria’ designed by WWF. See our Green Bonds Impact Story 1 for more detail.
Standards have moved from relatively lax process guidelines with a primary focus on climate to more prescriptive taxonomy-based standards with robust definitions, including specific criteria for biodiversity and ecosystems protection, including ‘do-no-significant harm criteria’ designed by WWF. See our Green Bonds Impact Story 1 for more detail.
New standards will shape how companies report environmental information
From 2023, the EU’s new sustainable investment framework (also referred to as the ‘EU Taxonomy’) and related disclosure rulebooks will require almost 50,000 major companies to report on the share of their ‘green’ revenues that meet environmental performance criteria. This will provide environmentally-minded investors with much better information on how ‘green’ European companies are and shed light on how they are contributing to environmental sustainability. See our Green Bond Impact Story 2 for more detail.
But there is still much to be done. The EU Taxonomy, for example, includes controversial activities such as gas and nuclear, and has weak criteria for certain sectors and activities.
But there is still much to be done. The EU Taxonomy, for example, includes controversial activities such as gas and nuclear, and has weak criteria for certain sectors and activities.
ESG fixed-income investments have become ‘mainstream’, reaching US$3 trillion in 2022
International debt capital markets labelled as green will be the first to consider adopting these new investment frameworks. With a market share of 13% globally in 2022, and in excess of 20% in Europe, ESG bonds have reached ‘tipping points’ in Europe and some emerging markets, paving the way for ‘greening’ debt capital markets.
Public sector
Public sector issuers have played an important role in the creation of the market. In 2016, WWF began working with the French government on its inaugural sovereign green bond, and helped kick-start sovereign green bond issuances, a market which now represents a volume of more than US$ 300 billion issued by more than 40 governments in both developed and emerging markets. In Malaysia, for example, WWF successfully shaped the world’s first sovereign green sukuk, a sharia-compliant bond-like instrument used in Islamic finance. See our Green Bond Impact Story 3 for more detail.WWF calls on practitioners to speedily adopt best practice standards
Whether debt capital markets labelled as green eventually play their part in saving the planet, and become zero carbon and nature positive, now depends on those who control transactions, including market practitioners, financial regulators, supervisors, and central bankers.
What counts is that issuers of green bonds, underwriters, and investors shift away from environmentally harmful debt capital instruments, and move into green debt instruments that fulfil the criteria of best practice green bonds.
This is why WWF is calling on practitioners to speedily adopt these new best practice green bond standards.
What counts is that issuers of green bonds, underwriters, and investors shift away from environmentally harmful debt capital instruments, and move into green debt instruments that fulfil the criteria of best practice green bonds.
This is why WWF is calling on practitioners to speedily adopt these new best practice green bond standards.
Related Reports & Briefings
Green Bonds Impact Story 1
PDF 614 KB
Green Bonds Impact Story 2
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Green Bonds Impact Story 3
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When Finance Talks Nature - WWF with Climate & Company (2022)
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Can Debt Capital Markets save the planet? EXECUTIVE SUMMARY
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Can Debt Capital Markets Save The Planet? REPORT
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Can Debt Capital Markets Save The Planet? WWF & Environmental Finance WEBINAR Sep 30 2021
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Green Bonds Market
© WWF
Green Bonds in Numbers
© WWF