In recent months we've seen over 15 different types of sustainability debt instruments enter the capital markets. Sustainable finance is a broad church with many denominations! Some market participants have been critical of this mushrooming of standards (see below cartoon) which is occurring across debt types, investor classifications and verification methodologies.
When it comes to debt products, their concerns often are:
- How do I compare different Green, Social & Sustainability (GSS) Labels - i.e. a Blue Social versus a Sustainability bond?
- Will newer bonds issued under newer standards be as liquid - i.e. accessible to existing or new indices, appealing to as broad a range of socially responsible investors?
- Will it hamper the ability to make existing standards (e.g. the ones enshrined by International Capital Market Association principles) true market "gold standards", with clarity on disclosure, impact reporting and - potentially - in the future more favourable regulatory treatments?
Yet other clients welcome new standards:
- It ensures focus on more targeted sustainability investments, i.e. towards transition projects or water sanitisation
- This could be better suited to the "brand" of a particularly company
- In addition, it allows both issuers and investors to distinguish themselves from the more generic green debt issues
How do you navigate this "green minefield"? Key topics we tend to discuss with companies when reviewing standards:
- What standard is most relevant to your sector / business profile, i.e. helps you invest in your most impactful ESG-related projects?
- What standard do you debt investors and other stakeholders support / understand?
- How does this standard meet the responsible investor "litmus test" of the 4 A's of Level of Ambition, Analysis, Additionality and Alignment?
- If a relatively new standard, to what extent can you compare it to the better-understood standards?
In addition, it pays to keep an open mind. Standards and expectations are evolving quickly. "I will never issue this type of bond" could be the proverbial famous last words!

Source: xkcd.com