Industrial Policy, Investment and Green Growth

The GRI was founded in 1997 by the Coalition for Environmentally Responsible Economies in partnership with the United Nations Environment Programme, https://​www.​globalreporting.​org/​reporting/​g4/​Pages/​default.​aspx

In addition to direct issuance, and following the example of the international Development Banks, governments are also engaging or contemplating actions to develop the market for green bonds by supporting deal flow and aggregation, and creating the enabling policy and risk environment. Some of these actions are the operations of Credit Enhancement/Guarantees/De-Risking, whereby the credit rating of the bond is improved by a partial or total guarantee provided by the government (E.g., US Department of Energy Loan Guarantee program). Public entities can insure Power Purchase Agreements (PPAs) on renewable energy generation projects as well as provide credit enhancement wraps for Collateralized Debt Obligations (CDOs) of project loans to address political and other market risks and first-loss (default) risk. Backstopping operations are also being used, whereby governments purchase sub-tranches of subordinated debt from early bond issuances to improve the risk profile of bonds by temporarily taking some first-loss layers from early issuances which would serve to lower their price and help the market gain familiarity. The government could also insure the credit or debt of the bond issuer. (E.g., European Investment Bank offers credit enhancement product targeted for clean energy). Governments also can, as demonstrated in the case of the state of Pennsylvania, purchase and securitize energy efficiency loans to recycle capital for further lending. As already experimented in the US, tax preferencing, in the form of total or partial tax exemption, can also be an effective way of developing a green bond market.

A consortium of investment banks—Bank of America Merrill Lynch, Citi, Crédit Agricole Corporate and Investment Bank, JPMorgan Chase, BNP Paribas, Daiwa, Deutsche Bank, Goldman Sachs, HSBC, Mizuho Securities, Morgan Stanley, Rabobank and SEB announced support for the initiative after it was made public through the website of CERES, a leading NGO in the field of collective action for policies toward climate change.

In this sense, there may be an important element of additionality incorporated in green bonds, in the sense that their impact may be more valuable if it is considered with respect to a counterfactual, e.g., the possibly harmful projects that would be pursued by the same issuers in an alternative scenario.

For more information on WB sustainable development projects see:

http://​treasury.​worldbank.​org/​documents/​IBRDInvestorPres​entation.​pdf

Due diligence concerns all activities of information collecting and analysis on the structure and performance of an object of purchase on behalf of the purchaser. In the case of an investment, due diligence aims to enable the potential investor to make informed decisions concerning the risks and the opportunities that the transaction offers. Due diligence assignments is generally combined with assurance, a process aimed to focus on the credibility of the information reviewed during the due diligence assignment, whose lack may result in the abandonment of the potential investment.

Sustainable Prosperity is a national research and policy network, based at the University of Ottawa. SP describes itself as focusing on market-based approaches to build a stronger, greener, more competitive economy and in bringing together business, policy and academic leaders to help innovative ideas inform policy development.