The segment bundles all bonds included in trading on the Frankfurt stock exchange that meet the Green Bond Principles of the International Capital Markets Association.
Green bonds or green bonds have the same structure, yield and risk as "normal" bonds. The difference: The issuer of a green bond uses the proceeds to finance a climate protection or environmental project. The majority of Green Bonds in Germany are issued by development banks, but also by commercial banks, companies and governments. Among the projects financed, renewable energy is the clear leader, followed by environmentally friendly buildings.
Green is not the same as green. Green bonds can be divided into two categories: those that are on the market without the "green bond" label and those that are specifically marketed as Green Bonds and at best are certified. However, there is no universal standard or mandatory certification for bonds marketed as "green bonds".
Voluntary guidelines from private initiatives such as the Green Bond Principles of the International Capital Markets Association (ICMA) or the Climate Bonds Standard of the Climate Bonds Initiative offer orientation and transparency.
The Green Bond segment on the Frankfurt Stock Exchange bundles bonds that meet the ICMA guidelines. The Green Bond Principles contain four components:
- Use of issue proceeds
How the issue proceeds are used is described in the bond prospectus. Nine categories of projects are Green Bond eligible: from renewable energies and sustainable waste management to clean mobility projects.
- Project selection process
The issuer discloses the criteria according to which it selects and evaluates green projects. The issuer also sets out the sustainability objectives of the project.
- Revenue management'
The collected revenues must be managed separately. A formal internal process ensures that the proceeds are used exclusively for the lending and investment activities of the green projects.
At least once a year, the issuer shall provide information on the investments until the funds have been fully allocated.
Impact-oriented investing plays a key role in the market for socially responsible investments - especially since the 21st UN Climate Change Conference in Paris in 2015, when a Memorandum of Understanding was reached setting the framework for further investment in low carbon technologies and infrastructure.
The bond category on the Frankfurt Stock Exchange is therefore only a small part of a large whole. Deutsche Börse AG, operator of the Frankfurt Stock Exchange, is active in the Sustainable Finance Cluster together with the Hessian Ministry of Economics. The aim of the sustainability initiative is to make efficient use of financial market expertise in the field of sustainable finance and, above all, to formulate and implement concrete approaches for the sustainability of financial market structures.
June 2019, © Deutsche Börse AG