by Mariam Alam
As the global focus on sustainability intensifies, green bonds have gained prominence as a financing tool for environmentally friendly projects. Green bonds offer private investors the opportunity to support projects with positive environmental impacts, while providing issuers with access to capital for sustainable initiatives. My summer research project centred on the establishment of a comprehensive database of the green bonds that have been issued to date.
Some may ask, but why a database? Well, green bonds are issued with the promise that the funds will be used for environmentally beneficial projects, and so a database allows researchers and interested stakeholders to assess reporting transparency and the actual environmental impact in the use of proceeds. A green bond database such as the one that I have been involved in building for my summer internship facilitates the aggregated measurement of the environmental impact of projects funded by green bonds.
This impact assessment is crucial for evaluating the effectiveness of sustainability initiatives and guiding future investment regulation of climate financing tools. Many issuers and investors operate under voluntary frameworks that require them to report on sustainability-related activities. However, there are no publicly available datasets that provide a comprehensive summary of what is contained in those reports, across all green bonds.
My summer internship aimed precisely at filling that gap. I had the valuable opportunity to work closely under the guidance and supervision of Professor Lina Brand Correa on a research question led by MES graduate Sila Basturk Agiroglu. The primary focus of our research was to comprehensively understand the extent to which green bonds are contributing to positive environmental impacts. We aimed to carefully explore the issuer’s green bond reports, one by one, capturing basic information from each green bond and scoring them in two angles: Additionality and Transparency.
I assisted in evaluating the reported environmental impacts of projects funded by green bonds. This required careful analysis of data to determine the extent to which the projects were fulfilling their intended sustainability goals. I collaborated with Sila Basturk Agiroglu to gather information on a wide range of green bond offerings across different sectors and regions. This included studying official documents, reports, and prospectuses to ascertain the details of each bond’s use of proceeds, the sub-sectors targeted through use of proceeds (list of all mentioned sectors based on the International Capital Market Association (ICMA)’s breakdown), involvement in refinancing, share of refinancing, exclusion of activities listed within the second party opinion, impact report publication year, country of projects financed, disclosure of yearly breakdown of investment amount, sectoral breakdown of investment amount, disclosure of total project cost, verification of the use of proceeds by a third party, type of assurance, disclosure of key performance indicators (KPI) calculation verification by a third party, disclosure of expected lifetime environmental impacts, disclosure of the KPI calculation methodology, disclosure of a greenhouse gas (GHG) emission avoidance/reduction or another quantitative metric and lastly the methodological background of GHG emission calculations.
Overall, this experience has equipped me with a unique blend of knowledge, skills, and perspectives that extend far beyond the confines of the research project itself. It has empowered me to be a more informed and responsible person, with the ability to advocate for sustainable practices. One of the most significant takeaways from this experience is a comprehensive understanding of the world of green finance and its pivotal role in driving positive environmental change. I have acquired practical knowledge of research methodologies and data analysis techniques as well as learned how to critically assess information from various sources and draw meaningful conclusions. These skills are not only valuable in academia but also applicable in various real-world scenarios. I also look forward to continuing my collaboration with Prof Brand Correa and Sila, as we make the database publicly available and translate our results into an academic paper.
Mariam Alam is a recipient of EUC's Undergraduate Research Award (EUCURA) and worked with Lina Brand Correa and MES student Sila Basturk Agiroglu on the project ‘Developing a Green Bonds Database’ to collect environmental data to assess potential impacts of projects financed by green or sustainable bonds.