But uncertainty among institutional investors about the environmental benefits of green bonds may limit this potential. A lack of transparency in the green bonds market has reputational risks for organizations issuing green bonds. Surging interest among companies in issuing green bonds could exacerbate these challenges unless something is done.
Trucost believes that natural capital quantification and valuation offers issuers and investors the opportunity to develop a green bond market that is robust, credible and transparent. By quantifying the environmental benefits of green bonds and putting a monetary value on those benefits, all players will be able to compare performance of different issuances on a like-for-like basis. Such a move would increase competition in the market, enhancing the contribution green bonds could make towards transitioning to a greener economy.