Green Bond Reporting

Are green bonds really “green”? A number of legal scholars have addressed various aspects of this critical question. However, none has focused on issuers’ post-issuance assertions about what they spend the bond proceeds on and on the way those assertions are, or are not, verified. This paper is the first empirical study in legal scholarship of post-issuance reporting on the use of green-bond proceeds. Using a dataset from the Bloomberg service that covers all 155 dollar-denominated corporate green bonds from US corporate issuers in the period from mid-2019 to mid-2022, supplemented by a Web review of reporting, the paper reports that almost 10% of green bonds appear to have no post-issuance reporting and that around one third of the bonds lack reporting that is attested by a third party. Project-level attestation, the most detailed type, exists for around 30% of attested bonds and 20% of all US corporate green bonds. Much of the commentary on green-bond verification focuses on assessments by pre-issuance reviewers, building on an analogy to credit rating agencies. But an important difference between green-bond verification and credit rating is that investors are likely to find it difficult to determine whether an issuer used bond proceeds for green purposes, while they will typically know if the bond is paying them on time or not. Thus, credible post-issuance reporting is especially important in the green-bond context. Moreover, this study finds that pre- and post-issuance reporting quality have been negatively correlated in some respects. Thus, advocates of green-bond market reform should concentrate more on improving post-issuance reporting than they have to date. Specifically, the International Capital Markets Association should consider amending its green-bond standards to require attestation of post-issuance reporting and withdrawal of pre-issuance “greenness” opinions if issuers do not report as required on use of proceeds.