In recent years, the growth of sustainable finance has exploded across the world in response to the climate emergency. Data from the Climate Bond Initiative shows that annual green bond issuance crossed the half-trillion mark for the first time in 2021, ending with $522.7 billion, a 75% increase from to 2020. Europe was the most prolific issuing region, while Asia-Pacific saw the highest annual growth (129%). Notably, Latin America saw the most impressive increase, growing 338% year-over-year to $11.5 billion. As the sustainable investment space expands, access to transparent environmental, social and governance (ESG) data is essential for investors to make informed sustainable investment decisions.
The Nasdaq Sustainable Bond Network is a global platform that connects sustainable bond issuers with investors seeking detailed insights for due diligence, screening, reporting and monitoring.
“The idea is that we can support issuers,” said Ann-Charlotte Eliasson, head of the Sustainable Bond Network. “Rather than spending hours in meetings figuring out what to report and hours researching data, filling out spreadsheets from different investors, they can instead spend their time continuing to make investments that have a positive environmental and social impact. That’s why we embarked on this project.”
Growing importance of Green, social and sustainability bonds
By providing high-level accessibility and transparency to Green, Social and Sustainability (GSS) bonds, the network facilitates investment and risk management, aligning with Nasdaq’s core mission of providing fair, transparent markets and efficient.
Access to this information is becoming increasingly critical as the next generation of investors have expressed an increased interest in sustainability. A 2021 Morgan Stanley survey found that 99% of millennials were interested in sustainable investing – an all-time high. This increased attention compels issuers to tell their story, describing how their GSS bonds contribute positively to the environment and society.
Issuer quality and ESG factors are key considerations for investors. With GSS bonds, investors have a quick and easy way to identify funding that will go towards environmental solutions. Without this type of label or identification, investors will not necessarily have a complete picture of the potential environmental risk of their investments. However, through the network’s platform, companies and investors can compare the performance of issuers in a particular sector.
“A big part of improving transparency in the GSS bond market is improving comparability. Otherwise, it is very difficult to know if you have made the right investment or how to evaluate it. I think that’s our biggest contribution,” Eliasson said.
Supporting markets in transition to a sustainable future
To help markets chart a course towards sustainability, Nasdaq’s Sustainable Bond Network enables investors to assess the impact and make informed investment decisions on sustainable bonds. The network’s platform standardizes bond data in a single framework to improve disclosure and quality. Data includes key sustainability bond documents, such as frameworks, external review and assurance reports, as well as allocation and impact reports and position paper-based impact metrics of the Nordic public sector.
As part of its commitment to providing fair, transparent and efficient markets, the Network aims to set a clear standard for issuers by providing them with a specific reporting framework to follow and ensuring that they state their environmental objectives and that they undertake to achieve.
“With the NSBN, we can finally measure the impact,” said Alecta’s chief investment officer, Peter Loow. “The reports are available in a very user-friendly and standardized format, which is what we were looking for. It really made things easier for us.
Promote transparency through comparability and unique data offerings
As the green bond market expands globally, being part of the Nasdaq Sustainable Bond Network helps issuers reach new investors. The network is also unique because no other market player collects green bond data at such a detailed level.
Importantly, it allows issuers to learn best practices by comparing data between peers, improving transparency for investors, who can leverage the network to review what issuers report and their key performance indicators.
“The network is a great initiative that supports transparency in the market…it gives investors the ability to check the impact of a project after it’s launched, which is a really cool feature,” said CICERO Shades of Green Ltd. Managing Partner Christa Clapp.
Use independent advice to promote sustainable investment decision-making
As the network grows, an independent advisory board ensures that the platform aligns with the needs of issuers and investors. The council also ensures that the network promotes data-driven and more sustainable investment decisions. Board members include international issuers, investors, investment banks and sustainability experts from around the world, such as Black Rock, Pimco, JP Morgan and Bank of America.
Future prospects for the network
Since its launch in 2019, the network has generated significant momentum, including:
- Evolve into one of the world’s leading platforms for sustainable bond transparency
- Attract a wide range of issuers and investors, such as supranationals, including the International Finance Corporation and the African Development Bank, and a wide range of corporates
- Representing 75 countries, with 10,432 bonds listed by 1,161 issuers
Going forward, Nasdaq aims to be the catalyst for the creation of more GSS bonds from all types of companies and hopes to achieve greater global coverage by improving functionality for investors and issuers. and allowing greater comparability between issuers. It also continuously reviews the reporting criteria to ensure they are correct for the current moment.
“NSBN is very important to us,” said Mike Brown, environmental finance manager for SF Water. learn best practices, reach new investors and hopefully grow our green bond program. »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.