How a green bond is born: from prospectus to reporting

The popularity of green bonds saw a steep rise in 2021. Investors seeking to ensure their money makes a positive impact on the planet have put a record $513 billion into green bonds globally. Whether you're a corporation, a governmental organization, or a bank, green bonds may be a viable way for you to raise capital. What steps do you need in order to tap into the potential of green bonds? We summarise the essentials for you in 4 steps. 

Thinking about issuing a green bond? At Frank Bold, we will prepare the entire issue for you, including the prospectus and promotion.

1. Green Bond Framework

Green bonds should always be used to finance environmentally beneficial projects. If you want to issue a green bond, you will need to develop the green bond framework explaining the purpose and terms of the issue (usually with the help of large banks). In the framework, you will need to describe how the funds generated by the bond sale will be used and what their impact will be. 

If you want to offer the bonds publicly and without volume limitations (so-called "over-limit bonds"), in addition to the terms of issue, you will need to draw up and publish a prospectus containing  key information about the issuer and the bond.

2. External Verification (Second Party Opinion)

You must then present the green bond framework to second-party opinion providers for evaluation and verification. These independent companies will assess your projects and their benefits, and will determine the legitimacy of the green bond.

The global industry is guided by the voluntary Green Bond Principles, formulated by the International Capital Market Association (ICMA). The British Climate Bonds Initiative also provides its own version of green bond standards (Climate Bonds Standard and Certification Scheme), but these are non-binding.

It was the European Union that pioneered the green bond market. Its proposal for a European Green Bonds Regulation (EU GBS) in 2021 contains binding requirements for the issuance of European green bonds. 100 % of the funds must be invested in accordance with the requirements of the EU Taxonomy. The EU GBS also stipulates the need for verification by an external assessor to ensure the project meets the sustainability criteria set out in the EU Taxonomy. These external assessors will be registered with and supervised by ESMA (European Securities Markets Authority).

Although the EU GBS regulation is not expected to be effective until next year at the earliest, some companies have already started to comply with these rules, in order to take advantage of the opportunity to raise capital from investors and banks.

3. Finding investors

As a third step, you will have to seek investors. Once the bond has been verified and approved by an external company, you need to start approaching potential investors. In private meetings, investors will ask you all sorts of questions about how the funds generated by the bond sale will be used and what impact the financed activities will have on society and the planet. If your investor's "roadshow" is successful, you will be able to launch the issue on the primary market, where the bonds will be sold to investors. 

4. Reporting

Your journey doesn't end with the bond issue. As a green bond issuer, you should regularly report important information to investors. ICMA recommends reporting what projects are being financed by the bond, the amount of investment in each project, and its expected impact on society and the environment. The EU GBS will introduce stricter reporting and verification requirements to prevent greenwashing and ensure that all funds are invested in green activities as defined by the EU Taxonomy.  

ESG reporting and monitoring and green bonds from A to Z

Thinking about issuing a green bond? We will arrange the entire green bond issuance for you, including the prospectus and its promotion. We will assess your projects' portfolios to be included in the bond issue in terms of their compliance with the EU Taxonomy or the Green Bond Principles (second party opinion).

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Practical examples

‍Maersk accelerates fleet decarbonization

Integrated logistics company Maersk placed a 10-year, €500-million green bond to fund the building of its first feeder vessel and the ground-breaking series of 8 large ocean-going container vessels which will be capable of operating on carbon-neutral methanol by 2023 and 2024, respectively. The transaction was met with strong demand and was oversubscribed several times. This green bond is the first fundraising under Maersk’s newly launched Green Finance Framework, under which the company plans to issue a variety of sustainable financing instruments such as bonds, loans, and project finance.

Iberdrola has completed a €1 billion green bond issue

Global energy and electricity provider Iberdrola has completed the issuance of a new €1 billion green bond. The offering met strong demand, despite the turmoil in the European corporate debt market caused by the ongoing war in Ukraine. The offering was oversubscribed by more than 3 times, with demand exceeding €3 billion. Iberdrola stated that the issue has been allocated among 181 investors, mainly from Europe and the UK. Funds from this issue will be used to partially finance Iberdrola’s investments in renewable offshore wind installations in France and Germany.

Česká spořitelna and the largest issue in the Czech Republic

In 2021, one of the largest Czech banks, Česká spořitelna, offered €500 million worth of green bonds to international investors to finance sustainability and environmental projects. The funds raised will be used for energy-saving projects in commercial and retail real estate and renewable energy. Interest from foreign investors has reached up to EUR 1.3 billion. It was the largest green bond issue to date among financial institutions operating on the Czech market.