Second Party Opinions on Green, Social and Sustainability Bonds
We can review your bond, let you know if it qualifies, and recommend the most appropriate label.
What are Green and Social Bonds?
Green bonds are any type of debt used to finance or refinance qualifying projects that have an environmental benefit.
Social bonds finance projects that directly aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes for target populations. Affordable housing, healthcare, and education are sectors that often align well with social bond standards
There are well-established internationally accepted criteria for what constitutes “green” and “social” in many sectors. Green and social bonds meet criteria established in the International Capital Market Association (ICMA’s) Green Bond Principles and Social Bond Principles.
Not Every Municipal Bond can be Green or Social
It is a common misperception that everything in the muni space is green or social. While it is true that muni bonds are generally focused on the provision of public goods, not every muni bond can meet the ICMA standards. Investors, wary of “greenwashing” or “impact washing,” often look for a qualified external review to confirm alignment and help them meet investment mandates and compliance requirements.
What is a Second Party Opinion?
Similar to how financial statements are audited by an external accounting firm, it is best practice for green and social bonds to receive an external review. Currently, a majority of labeled bonds receive an external review.
An independent, external review on green, social, or sustainability bonds or loans is called a Second Party Opinion.
We follow ICMA’s ethical and professional standards which are guided by five fundamental principles:
- Professional competence and due care
- Professional behavior
Green Bond or Climate Bond?
For Certified Climate Bonds, the external review is called a Verifier’s Report. It differs from a Second Party Opinion in that it explains how the bond meets the Climate Bonds Initiative (CBI) Climate Bonds Standard, rather than ICMA’s Green Bond Principles. Since there are often numeric targets to be assessed, not every green bond will qualify as a Certified Climate Bond.
Social Bonds for COVID-19 Response?
The global COVID-19 outbreak is a social issue that threatens the well-being of the world’s population and your response can qualify for social bond designation. Many issuers are considering COVID-19 Response Bonds. These can be verified for conformance with the Social Bond Principles, as per the ICMA updated guidance in June 2020.
We understand the urgency that municipal issuers face with COVID-19 response, and we are here to help.
Albert Robles Center for Water Recycling & Environmental Learning – Water Replenishment District
City of Pico Rivera, California
Our Efficient Process
1. Contact Kestrel for a no-cost consultation to evaluate your bond.
We will review the use of proceeds and other criteria to recommend the appropriate Green, Social, Sustainability or Climate Bond designation.
2. We gather key information.
Our skilled analysts work with issuers and Financial Advisors to confirm our understandings. Our goal is to minimize your effort and to be as efficient as possible with everyone’s time.
3. Kestrel performs an external review.
We prepare a Second Party Opinion for inclusion in the offering documents and can assist with marketing materials. For Climate Bonds, we will liaison with the Climate Bonds Initiative.