Setting standards for green bonds is vital so investors can find which do the most environmental good, speakers at an industry conference said.
‘Consistent practices for disclosure in green bonds are essential. Now there is no way to compare the environmental impact between them,” U.S. Rep. Carolyn Maloney, D-N.Y., said at a Securities Industry and Financial Markets Association (SIFMA) conference on Thursday.
Pat Quinn, a managing director at Nomura Securities, added that the lack of rules to validate ecological gains is the primary obstacle to growing the market beyond the $100 billion currently from investors.
Neither the Securities and Exchange Commission nor the Municipal Securities Rulemaking Board has the authority to issue disclosure standards on green bonds issued by state and local governments.
However, the SEC could set disclosure requirements for corporate green bonds.
SIFMA President and CEO Ken Bentsen said he would prefer the industry create the standards rather than the SEC because the rules could be set in place quicker, but he added that all options are on the table.
SIFMA issued a statement for the conference calling green finance “a growing imperative.”
Corporate issuers only represent a drop in the bucket of the green bond pool, but there is plenty of potential for growth because of the need for businesses to lower their carbon footprints, said HSBC Capital Finance Director Kurt Vogt.
Green bonds are needed to fund everything from wind farms to bike paths to city buses to cement companies switching to alternative fuels, Vogt said.
Beyond standards to gauge the environmental bang-for-the-buck of green bonds, Morgan Stanley Public Finance Group Vice President Zachary Solomon said another thing needed to grow the market is a way for investors to go to court if the proceeds from the bonds aren’t used for green financing.