Sustainability contract
Introduction
Sustainable financing or green financing (also sustainable financing or green financing) is the set of financial regulations, standards and financial products that pursue an environmental objective, and in particular facilitating the energy transition. Sustainable financing allows the financial system to take into account the population and the environment while maintaining a growth objective. This concept, which had existed for a long time, was promoted by the adoption of the Paris Agreement, which stipulates that the parties must achieve "financial flows compatible with a roadmap towards low carbon dioxide emissions that cause the [greenhouse effect] and with development resilient to global warming."[1].
Tools
Green bonds
Green bonds are debt securities issued in the market by a public or private entity to finance environmentally friendly activities. They reached 170 billion US dollars ($) in 2018 and are expected to reach 359 billion $ in 2021.[2].
The Paris Agreement highlighted a desire to standardize reporting practices related to green bonds, to avoid greenwashing.
From a legal point of view, green bonds are not really different from traditional bonds. Promises made to investors are not always included in the contract, and when they are, it is often in a non-binding form. Green bond issuing entities typically follow standards and principles established by private organizations such as the Green Bond Principles of the International Capital Markets Association (ICMA) or the Climate Bond Initiative label.[3][2].
To date, there is no regulation that requires the issuer to specify in writing its "green" intentions in the conditions of the issue. However, the European Union (EU) is currently developing a green bond standard that will oblige issuers to finance with the money they obtain from these bonds only activities aligned with the EU taxonomy of sustainable activities.[4].
It is expected that this standard will be voluntary and operate alongside other existing voluntary standards, as scholars and financial intermediaries have tried to make policymakers aware of the dangers of imposing mandatory standards on this issue.[5][6].