By Melissa Chase
Second-Party Opinion - Green Bonds, Social Bonds, Sustainability Bonds
Issuers looking to support their sustainability strategy through sustainable finance solutions have several options, from sources of debt to equity instruments. These solutions include Green Loans, Sustainability Linked Loans, Green Bonds, Sustainable Bonds and more.
When issuing bonds, issuers can self-label them as green, social or sustainable. The label depends on the types of projects being financed by the proceeds (i.e., the “use of proceeds”). For example, bonds with proceeds used exclusively to finance or re-finance green projects in renewable energy, can be labeled as green.
At a minimum, issuers can provide details to investors on the green eligibility criteria for the use of proceeds, as specified in the issuer’s green bond framework. However, it is recommended that an assessment of the green bond framework is performed by an independent third party. The assessment carefully analyzes the “greenness” of the eligible projects or assets mentioned in the framework. This assessment is also known as a “Second-Party Opinion” or “External Verification”.
A Second-Party Opinion by a trusted and a respected evaluation firm, provides a clear assessment of the issuer’s green bond framework or sustainability bond framework (See examples on 250+ Second-Party Opinions). A second-party opinion strengthens the credibility of the bond and helps gain the confidence of investors looking to invest in a green bond.