Standards Uniting Global Sustainable Finance

Thank you for having us.

I'd like to jump right in by, uh, discussing, you know, how label bonds, um, they've been in existence for fifteen, almost twenty years now.

Um, and as more governments are developing their own official green bond standards, are different localized taxonomies causing market fragmentation? Maybe you could paint a picture for our listeners of what this fragmentation looks like in practice today.

And is it possible for the green bond principles combined with a stronger standard, um, to solve this market fragmentation?

Well, let me start by saying that, uh, the concept of, uh, uh, user proceed bond, um, was born exactly with the objective to verify better how the funds are, uh, employed.

So we issued the very first green bond in two thousand and seven, and from the very beginning, our idea was to make accountable the flow of disbursements from the proceeds, uh, that, uh, can be raised with these bonds.

And for that you need a set of definitions.

This has proven to be an idea that investors have appreciated.

The market has developed strongly.

And with this effect, it has become clear that different, uh, uh, issuers, different countries, uh, different, uh, investors all have different preferences with regard to what they consider green.

So in reality, the taxonomy subject is not a subject per se.

It is a way by which, in fact, people have become conscious of the differences that exist among them.

Now, the instrument green bond has helped structure this prog-- this process, uh, because it has made apparent that these differences exist.

If you are an issuer that wants to show that what, uh, um, he's investing in has a value and that he's doing it right, doesn't want necessarily, of course, that, uh, um, his, uh, action is misperceived because others, in fact, define things in a different manner.

And, uh, so from this point of view, um, I would not say that the fragmentation is, uh, um, the result of, uh, uh, the establishment of taxonomies.

The establishment of taxonomies, in fact, makes comparisons, um, in a way, uh, more apparent.

The problem is that, uh, nobody is a... is, is willing to, uh, really create a kind of a common language.

And this is the reason why, um, you know- The natural trend of the market to establish common rules of the game inevitably ends when the different market participants come to comparing the different interests.

This is the reason why official, uh, standard setters, taxonomy setters, um, have come on top.

They are a sort of deus ex machina that tries to makes, uh, to make this, uh, uh, comparison in the world of finance more, um, fair, uh, more, um, indeed, uh, uh, comparable.

Um, and inevitably, this, uh, creates, however, the feeling that the market is not a single market.

So, uh, maybe just to complete the picture, there is-- uh, there have been, uh, two responses to this essentially.

The first one has been, and we again contributed, uh, uh, in two thousand and sixteen, two thousand and seventeen, let's say, there were the first attempt to create taxonomies.

First, the China taxonomy, uh, and, um, the multilateral development banks were, uh, in fact, already calculating, uh, you know, statistics on the basis of common principles.

So the first idea was, is it possible to create a common language by defining a shared terminology that permits an equivalence? Is it possible, for example, to use the common principles of the MDBs as a Rosetta Stone? And this discussion has continued until now, uh, with the common ground taxonomy that is be under discussion, for example, in the International Platform on Sustainable Finance.