Q) What was the motivation for Climate Bonds Initiative to curate capacity-building initiatives in the green bond space? What gap in the market is it trying to address?
A) As mainstream financial education imparts knowledge of financial principles and techniques, it may be amiss of not focusing adequately on financial innovations related to the negative externalities our world faces today. One of these externalities that has rapidly come into public discourse is the threat of climate change and the existential impact on our natural and social ecosystems. The World Economic Forum’s 2020 Global Risks Report reaffirms this, as it said seven of the top-ten risks threatening the world are environmental or social, a shift from its 2017 version that had listed terror, migration and data theft. In 2018, the IPCC’s report mentioned our inability to limit the global temperature rise within 1.5-2°C may have irreversible effect on climate, water, food security, vector-borne diseases, etc.
In this context, green bonds emerged as an innovation in finance this decade. Its objective is to fund the transition towards green projects, for banks, corporates, sovereigns, etc., such that it pushes us towards net zero-carbon and reduces the risks our natural and social ecosystems face. Green bonds have seen significant traction, growing to ~3-3.5% of the overall bond market globally in 2019 from sub-0.5% levels just five years ago.
But the challenge is traditional financial education is mostly yet to inculcate training on such sustainable finance products and the impact they have in shifting investors’ perspectives on climate-change-aligned investments. Closing this gap was the main motivation for Climate Bonds Initiative to use its industry expertise and experiences to curate a capacity-building initiative focused on green bonds for working professionals, namely the Green Bond Boot Camp.
Q) But with short-duration courses on sustainable finance picking up, what is the edge that Climate Bonds Initiative’s Boot Camp brings to the table for learners?
A) Certain features make our program stand out relative to similar short-duration programs that have sprung up in the market to close this gap in sustainable finance education.
Our content coverage is more holistic as it covers not only the basics but also advanced issues like labelling, market dynamics, policies, taxonomies and certification processes. You will notice most other courses focus only on the basics.
Next, Climate Bonds Initiative remains an industry pioneer on climate bonds’ certification standards and market development, and this experience is invaluable whilst structuring the course content and delivery. Most other courses are offered by academia, who cannot boast a direct expertise but rather rely on acquired knowledge.
Following on this, our trainers are industry practitioners with extensive experiences in this domain. Thus, they are better placed to complement the delivery with practical examples that augurs well for an audience largely made up of working professionals.
Our course involves a practical assignment, to make a green bond framework for a sample project, that helps learners apply the knowledge. Most other short-duration courses remain theory biased.
Last, being a short-duration course makes it easier for working professionals to attend without dropping-out, as compared to long-duration degree or diploma courses.
Q) Tell us how the course is structured, and what is its coverage in terms of content?
A) The Green Bond Boot Camp course is spread across 3 sessions of 2.5 hours each, structured on the basics and background on Day 1, labeling, taxonomies, certification and market development on Day 2 and policies and practical exercise on Day 3.
We start by decoding sustainable debt products like green bonds, sustainability bonds, social bonds, etc., and move to the trends observed across products, regions, use-of-proceeds, tenor, and issuers. We then deep dive into the green bond product specifically, its whys and wherefores from the investor and issuers’ perspective, how it connects with the UN-SDGs, the multiple role of the underwriters, how exchanges are setting up dedicated green listing counters, the market’s development over the last decade and the regional trends of issuances and issuer-types. In this, we demarcate the specific factors that supported green bond advancement in each region.
Our session on labeling and taxonomies, while making the Boot Camp very intensive, also helps impart the knowledge the learners would otherwise find it tough to access and comprehend from other courses. We focus on aspects like the issuance process of a green bond vs. a vanilla bond, the labeling used for green bonds, how standards and principles vary, the pillars of the green bond principles, methodologies of pre-issuance and post-issuance reviews, etc.
We add our insights on how the types of external reviews differ from each other, why certification could be the way forward for green bonds, why merely calling an over-subscribed green bond as a success can be a misnomer, which issuer-type we feel can help scale-up this segment, etc.
We add context by explaining the sector criterion developed in-house, and how green bond policies moved in different geographies. The finale is a practical exercise to create a green bond framework for a project. This holistic coverage, along with the scope to clarify queries as our sessions are live, makes it a pragmatic option for those keen to understand how green bonds work in practice.
Q) Do you feel the finance and sustainability are only set to merge further, going ahead?
A) Various research studies show the correlation between financial performance and sustainability considerations. The growing awareness about climate and sustainability issues is only fueling the march. In my view, there seems to be little doubt that a momentum in the migration of capital towards avenues that promote a sustainable and inclusive future is to be expected. There may be temporary shifts owing to loose monetary policies as an aftermath of phases of economic slowdown, like the one we are in now.
But the broader trend of finance moving towards sustainability avenues should prevail. We also see surveys showing most millennials are tilting towards values-based investing, a trend that bodes well to further promote sustainable finance products.
In essence, the future of finance is turning green, and in a market bereft of holistic training courses, we feel the Climate Bonds Initiative’s Green Bond Boot Camp offers a pragmatic opportunity to close that knowledge gap that working professionals face today.