In recent years, the growth of sustainable finance has sky-rocketed across the globe in response to the climate emergency. Data from the Climate Bond Initiative shows annual green bond issuance broke through the half-trillion mark for the first time in 2021, ending with $522.7 billion, a 75% increase compared with 2020. Europe was the most prolific issuance region, while Asia-Pacific experienced the strongest annual growth (129%). Notably, Latin America showed the most impressive increase, growing by 338% year-over-year to $11.5 billion. As the sustainable investment space swells, 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 issuers of sustainable bonds with investors looking to source detailed information for due diligence, selection, reporting and monitoring. 

“The idea is that we can support issuers,” said Ann-Charlotte Eliasson, Head of the Sustainable Bond Network. “Rather than them spending hours in meetings figuring out what to report and hours searching for data, filling in spreadsheets from different investors, they can instead spend their time continuing to make investments that deliver positive environmental and social impact. That’s why we embarked on this.” 

Growing importance of Green, Social and Sustainability bonds 

By providing accessibility and high-level transparency into green, social and sustainability (GSS) bonds, the Network makes investing and managing risk easier, aligning with Nasdaq’s core mission to provide fair, transparent and efficient markets.

Access to such information is becoming increasingly critical as the next generation of investors has expressed a stronger interest in sustainability. A 2021 Morgan Stanley survey found that 99% of millennials were interested in sustainable investing – an all-time high. This heightened attention makes it critical for issuers to tell their story, describing how their GSS bonds positively contribute to the environment and society. 

The quality of the issuer and ESG factors are critical considerations for investors. With GSS bonds, investors have a quick and easy way to identify finance that will go toward environmental solutions. Without this kind of label or identification, investors won’t necessarily have the full picture of the potential environmental risk of their investments. However, through the Network’s platform, companies and investors can compare how issuers within a particular industry perform. 

“A major part of improving transparency in the GSS bond market is improving comparability. Otherwise, it’s very difficult to know if you have made the right investment or how it should be evaluated. I think this is our biggest contribution,” said Eliasson.

Supporting markets transitioning toward a sustainable future 

To help the markets chart the path toward sustainability, Nasdaq’s Sustainable Bond Network empowers investors to evaluate the impact and make informed investment decisions on sustainable bonds. The Network’s platform standardizes bond data into one framework to improve disclosure and quality. The data includes key sustainable bond documents, such as frameworks, external review and assurance reports, as well as allocation and impact reports and impact metrics based on the Nordic Public Sector Position paper.

As part of its commitment to providing fair, transparent and efficient markets, the Network aims to hold issuers to a precise standard by providing them with a specific reporting framework to follow and ensuring they state their environmental goals and what they are committing to achieve. 

“With the NSBN, we can finally measure impact,” said Alecta’s Head of Responsible Investing, Peter Loow. “The reporting is available in a very user-friendly format in a standardized way which is just what we’ve been looking for. It has really simplified things for us.” 

Promoting 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 participant collects green bond data at such a detailed level. 

Importantly, this allows issuers to learn best practices by comparing data among peers, ultimately improving transparency for investors, who can leverage the Network to review what issuers are reporting and their key performance indicators.

“The Network is a great initiative supporting transparency in the market… it includes the opportunity for investors to check out the impact of a project after it has been initiated, which is a very nice feature,” said CICERO Shades of Green Ltd. Managing Partner Christa Clapp. 

See related article: Nasdaq to Acquire Metrio, a Leader in Sustainability Software

Enlisting independent advice to promote sustainable investment decision-making

As the Network grows, an independent Advisory Board helps ensure the platform aligns with issuers and investors’ needs. The board also works to ensure the Network promotes data-driven and more sustainable investment decisions. Board members include international issuers, investors, investment banks and sustainability experts around the world, such as Black Rock, Pimco, JP Morgan, and Bank of America. 

Looking ahead for the Network  

Since launching in 2019, the Network has generated significant momentum, including: 

• Evolving into one of the world’s leading platforms for sustainable bond transparency 
• Attracting 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 

Moving forward, Nasdaq aims to be the catalyst for creating more GSS bonds from all different types of companies and hopes to achieve more significant global coverage by enhancing functionality for both investors and issuers and allowing for more comparability between issuers. It also continuously reviews the reporting criteria to ensure it is correct for the current moment.  

“The NSBN is very important to us,” SF Water Environmental Finance Manager Mike Brown said.“The green bond market is a market that is larger outside the U.S., so being part of an international network we think will be very valuable for us to 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.

Source: NASDAQ