Global reporting standardization could help mitigate investor concerns about ESG greenwashing in relation to green bonds, according to S&P Global.  The financial information provider believes sustainable bond issuance, including green, social, sustainability and sustainability-linked bonds, could collectively exceed $1 tn in 2021, a near 500 percent increase on 2018 figures. 

Despite this growth, a lack of transparency around instrument labeling, reporting and data disclosure leaves many stakeholders wondering whether greenwashing – where an organization presents itself as more environmentally friendly than it is – has tainted those numbers.  ESG terminology lacks consistency, which may drive investor confusion when it comes to identifying which companies or financial instruments adhere to a set of ESG standards.

There are more than 20 different sustainable bond labels, which all align with different guidelines or frameworks, according to the Journal of Environmental Investing Report 2020. The wide range of labels – and an even wider range of definitions for what constitutes a green or social project – makes navigating the sustainable bond market increasingly difficult for investors and reduces comparability across instruments. Recently, several standards and taxonomies have emerged in an attempt to help standardize the market and mobilize capital toward sustainable objectives….These principles promote standardization and transparency for the use of proceeds, sustainability-linked bond and the loan markets. 

S&P Global raises concerns over greenwashing | Corporate Secretary