Skip to content
Case study

EIB’s experience shows that Green Bonds can be a market-based process to promote accountability and engagement in climate finance

EIB’s Climate Awareness Bond (CAB) is the first Green Bond, establishing a transparent and accountable link between bond proceeds and disbursements to projects with environmental benefits.
Key points
  • CABs have increased interdepartmental cooperation in the area of climate finance, boosting organizational knowledge and improving communication on EIB’s climate action. Synergies have developed between Projects and Finance Directorates, favouring knowledge sharing and building new expertise. Product success in the capital markets has created an additional and very important channel of communication/interaction with external stakeholders.
  • Product innovation has enhanced market interest and enabled investors to engage more effectively in the area of climate finance. The direct link between CAB-proceeds and CAB-projects coupled with EIB-exposure rather than project-exposure has proven palatable to all kinds of investors, boosting demand and new issuance. The growth of the GB market has required investors’ involvement in the definition of minimum requirements, enhancing the credibility of the segment.
  • Larger volumes of Green Bond issuance have kick-started a spiral process gradually improving issuers’ accountability. Closer and deeper market scrutiny has triggered administration improvements by market leaders. Peer pressure has promoted a more open and cooperative debate on impact assessment methodologies (e.g., for the estimate of GHG-emissions) and reporting (common indicators to permit data comparison), revealing that no uniform standards yet exist. Investors’ request of external assurance has extended the debate to ESG-rating agencies, auditors and academic research institutes, stimulating a collective clarification exercise that is still ongoing.
  • Higher transparency and accountability have increased capital market awareness and started to mobilize new dedicated financial resources. SRI-investors, in particular, have been enabled to develop ad hoc investment
    guidelines, leading to more direct and effective involvement in the discussion of standards. This has proven a powerful source of progress in these areas.
  • Lack of commonly accepted project assessment standards still limits comparability of data from different issuers. While standards are being developed, transparency and accountability of tracking, allocation and reporting for the delivery of relevant and reliable information on the status quo are the key priority. At the same time, policy makers ought to clarify the link between official policy goals and different areas of climate finance (“what is green” in policy perspective) based on a shared standard set of climate tracking definitions.

Further development of the Green Bond market relies on four pillars: extension to new issuers via sufficient flexibility of minimum requirements; best practice development by market leaders; development of shared impact assessment, green bond administration and reporting standards via inclusive and open debate among all market participants; and, on this basis, forms of public support.