Issuers may feel fatigued by the complexity of green bond issuance for several reasons:
- Multiplicity of Criteria and Standards: The green bond market is governed by a variety of guidelines and standards, such as the ICMA’s Green Bond Principles, EU Green Bond Standard, and national guidelines in countries like India and China. This multiplicity can confuse issuers, as they must navigate and comply with different sets of rules and taxonomies.
- Overlapping Roles of Market Players: The presence of numerous stakeholders, including rating agencies, second-party reviewers, disclosure reporting guidelines, and industry bodies like ICMA and the Climate Bonds Initiative, adds complexity. Issuers must manage interactions with these parties, which can be overwhelming.
- Lack of Demonstrable Pricing Benefits: Despite the environmental benefits, many issuers do not see significant pricing incentives for green bonds compared to traditional bonds. This lack of direct financial benefits means that some issuers might view the additional complexity and costs of green bond issuance as not worthwhile.
- Risk of Greenwashing and Transparency Concerns: There is a perceived lack of direct investor protection in the green bond market, and concerns about greenwashing can make issuers cautious. Issuers need to prove that their bonds are genuinely green, which involves additional documentation and third-party verification, further complicating the process.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/why-do-some-issuers-feel-fatigued-by-the-complexity-of-green-bond-issuance/
