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Green evaluations - time to turn over a new leaf?

S&P Global Ratings expect strengthening of the green bond market fundamentals to fuel a 30% increase in self-labeled instruments globally in 2018, pushing issuance to around $200 billion for the year which is a slowing from the 80% experienced in earlier years as market matures. Issuers already come from ABS, Muni, banks, sovereigns and corporates. S&P Global Ratings predict a continued expansion of green bond market  world-wide because combating climate change has become a long-term economic and political driver and as investment legislation to encourage sustainable financing is being put in place world-wide.

2018

In 2018 S&P Global Ratings expect the green finance market to show three major developments:

  1. Further issuance by countries
  2. New types of financing instruments, e.g. green securitization, green lending, and green sukuk Islam-compliant bonds
  3. Adaptation green bonds.  

But to be able to take the opportunity to generate green investment or lending, corporates need to have their bond or investment evaluated as to how green it is and whether it will really reduce CO2 emission, etc. This is where the S&P Global Ratings Green Evaluations come in.

Green Evaluation

An S&P Global Ratings Green Evaluation is an asset-level environmental credential which aims to provide investors with a more comprehensive picture of the green impact and climate risk attributes of their portfolios.

S&P carryout independent and data-driven evaluation analyzes to estimate a project or initiative’s environmental impact and/or resilience level. These analyzes are used in the evaluation of the environmental impact of many different types of projects, including:

  • Green Buildings
  • Green Energy
  • Green Transport
  • Energy Efficiency
  • Water
  • Fossil Fuel Power Plants (decreased carbon intensity of conventional energy production)
  • Nuclear energy projects.

S&P Global Ratings Green Evaluation service:

  • Provides a second opinion confirming whether an issuer’s green bonds are aligned with the key features of the Green Bond Principles 2017
  • Can also be used to evaluate other bonds, equity transactions, bank loans, private placements, project finance debt, etc. 
  • Can be applied in pre-and post-issuance stage
  • Uses the Trucast environmental performance data and analysis
  • Provides a relatively score which considers variables such as sector, technology, location of the assets, and funding allocation
  • Can consider a variety of environmental key performance indicators such as carbon, water and waste 
  • Minimises the administrative burden on clients by carrying out the green evaluation, and credit ratings at the same time.

Users

S&P Global Ratings are used by:

  • Isssuers to: 
    • Diversify their investor base
    • Develop the potential to enjoy long term pricing advantages
    • Internally benchmark their green performance Y-O-Y
    • Send a strong, pro-active message to stakeholders
    • Appeal to millennials as employees and customers
  • Investors to:
    • Meet their clients’ needs/requests to ensure that instrument satisfies their green mandates
    • Balance risk-adjusted financial returns with sustainability benefits
    • Reduce time to evaluate these increasingly complex investments.

CTMfile take: Evaluating the environmental impact of projects will be needed increasingly, and eventually all projects will undergo Green Evaluation.


This item appears in the following sections:
Sustainable Green Treasury
Green Corporate Treasury Department
Sustainable Funding
Sustainable Investing

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