Spring 2020 Issue
including credit insurance, local currency guarantee or loss absorption. Anchor equity investment or project preparation grants financed by development stakeholders would ease the overall financial structuring. The listing of securities on local and international stock exchanges would help to reduce the currency and liquidity risks. A new class of green bonds, blended finance instruments, can be differentiated from ordinary bonds. The rewards and requirements for this new class of bonds can be standardised to achieve scale and systematic uptake by investors. Such a development should be complemented with a workflow of project preparation and due diligence practice on the environmental, social, financial and legal aspects. Quarterly standardised financial and impact reporting (either SASB or GRI) and the use of scientific metrics are equally important for investors to clarify their contribution to climate mitigation. SCIENTIFIC METRICS Currently, no mandatory standard exists for issuers of green bonds. Ideally, issuers provide information on the project selection process used to screen eligible projects (1), the use of proceeds (2), and the environmental benefit of the project by reporting qualitative or quantitative indicators, referred to as impact reporting (3). Almost all green bond issuers provide some data to back their claims of environmental benefit, but there is no consensus on what qualifies as good impact reporting. In its 2019 report on post-issuance reporting in the green bond market, the Climate Bonds Initiative found that the 1,517 bonds with impact reporting used more than 200 metrics to quantify their projects. The most common is greenhouse gas (GHG) emissions, but within the category emissions can be reported in different units or in percentage terms. Other common metrics include energy saved, generated or stored, air or water pollutants avoided or reduced, water saved, material recycled or waste avoided. Lifecycle based environmental metrics introduce an integrated framework that ensures that the impacts of a project are captured from resource extraction and construction phases, through use to end-of-life, deconstruction and disposal. The Luxembourg Institute of Science and Technology has calculated the lifecycle based environmental impacts of 61 renewable energy projects in 29 countries (financed through green bonds issued by the European Investment Bank over the 2015-18 period). Hydropower outperformed wind power for GHG emissions, while the biomass CHP power projects slightly increased GHG emissions over 185