Green bonds have grown in importance over the last 14 years as a tool for addressing the effects of climate change and related concerns. In today’s world, clean water and food security are in jeopardy. Climate change poses a hazard to communities, economies, agriculture, food security, and water supply.
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Green bonds are financial products that are used to fund green initiatives and deliver regular or fixed income payments to investors.
They have grown in importance over the last 14 years as a tool for addressing the effects of climate change and related concerns. In today’s world, clean water and food security are in jeopardy. Climate change poses a hazard to communities, economies, agriculture, food security, and water supply.
To overcome these issues, a significant amount of funding is required. It’s vital to link environmental projects with capital markets and investors to channel funds toward long-term development – green bonds are one method to do so.
Green Bonds Appear to Be An Unqualified Positive
These bonds are great for the would-be sustainable investor because they raise money for ecologically friendly use.
Even better, they typically provide similar yields to comparable conventional bonds, allowing investors to avoid paying for their principles. As a result, they’ve been met with enthusiasm, and issuance is swiftly increasing. It tripled between 2013 and 2014 and is expected to do so again in 2015, with a projected issuance of $100 billion.
However, some skeptics are raising concerns about the utility of this invention, namely if green bonds make a meaningful difference or are just another case of “greenwashing.”
Corporate watchdog ASIC has cautioned that scammers posing as employees of well-known financial services organizations are enticing individuals to invest in bogus environmentally friendly green bonds. According to a statement from ASIC, green bonds are not available to the general public or retail investors in Australia.
Any website or entity that claims otherwise is a con artist. The corporate regulator warned scammers selling bogus green bonds while posing as well-known financial services organizations last week.
Green bonds, which are used to fund new and existing initiatives that improve the environment and climate change, are not directly available to the general public or retail investors, according to ASIC.
The Australian Securities and Investments Commission (ASIC) has reported several fake green bonds. Green bonds can be purchased by superannuation funds, investment managers, insurance corporations, and other wholesale organizations but not by the general public.
“Green bonds are bonds used to finance new and existing projects that offer climate change and environmental benefits. They can be purchased by superannuation funds, fund managers, insurance companies, and other wholesale entities but are not directly available to the public.” says ASIC.
Debatable Points To Keep in Mind
There are a few points to debate. First, because there are no independent, globally agreed-upon criteria, the definition of a green bond has a lot of leeway.
Any corporation or municipality can issue a green bond to raise funds; it has to persuade the buyers that it is warranted. Those buyers may not be inclined to be hypercritical if they are fund managers trying to meet their sustainable investment quota. After all, if the purpose of constructing a highway is to relieve congestion, it may be regarded as “green.”
Those aiming to build the market have taken notice of this, of course. The Green Bond Principles, which were released in January 2014 by a group of banks with the help of Ceres, an investor group, are a voluntary framework aimed at standardizing credible green-bond production.
The Climate Bonds Initiative, based in London, was founded with the goal of developing verifiable standards. It has created both standards and a list of independent verifiers capable of certifying a product as green.
The World Bank and other supranational organizations that pioneered green bonds are also collaborating to set standards. However, this is still a work in progress, and investor knowledge of these norms, particularly among retail investors, has a long way to go.
Even if the green bond projects are as environmentally friendly as one would want, the question remains whether any new money is being channeled to environmental investment or if these projects would have been funded anyhow.
In a world where Lloyds Bank was lauded for a social impact bond that it later confessed was simply a repackaging of loans already on its books, examining the genuine impact of such instruments beyond the fancy wrapping is essential.
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What to Be Aware Of
- Like other wholesale products, consumers may purchase green bonds through a registered managed investment fund. However, they are not directly available to the general public or retail investors. Moneysmart has information on investing in a managed investment plan or MIS.
- Green bond salespeople are posing as representatives of well-known companies.
- People or businesses who use social media or websites to persuade you to invest in “environmentally sustainable green bonds.”
- Investing materials and disclosure paperwork that aren’t real.
Before investing, talk to your bank about the details, including disclosure documents. This will allow them to verify the offer’s validity before transferring payments.
Visit ASIC’s Moneysmart website for more information on investment scams and the checks to make before investing. Keep in mind, however, that these checks do not ensure a product’s legitimacy.
Are you suspecting you might have been scammed?
If you sense suspicious activity, take the following steps immediately:
- Please don’t send any more money.
- Notify your financial institution about it.
- Be aware of follow-up scams that promise to assist you in recovering your funds.
- Notify the authorities in your area.
- ASIC should be notified (unfortunately, ASIC cannot help you get your money back)