What is the ICMA Green Bond Framework?

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AcadiFi · Accepted Answer

The International Capital Market Association (ICMA) Green Bond Principles (GBP) are voluntary guidelines, first issued in 2014 and updated periodically, structured around four core components: 1. **Use of proceeds**: Proceeds must fund 'green projects' in categories like renewable energy, energy efficiency, pollution prevention, sustainable water, clean transportation, green buildings, biodiversity, etc. 2. **Process for project evaluation and selection**: Issuer discloses sustainability objectives, eligibility criteria, and decision-making process. 3. **Management of proceeds**: Tracked via sub-account or internal allocation register; temporarily held in cash or liquid investments until allocated. 4. **Reporting**: Annual disclosure of proceeds allocation and — ideally — environmental impact metrics (GHG avoided, MW installed, etc.). Recommended: external review (second-party opinion, verification, certification, or rating). Example: Larkspur Utility issues a €500M 10-year green bond. Framework document specifies: - Eligible: offshore wind (70%), EV charging infrastructure (20%), energy efficiency retrofits (10%). - Exclusions: fossil fuel, nuclear, large hydro. - External review: Second-party opinion from Sustainalytics. - Reporting: annual allocation + impact (tCO2e avoided, MW capacity added) on corporate website. ```mermaid flowchart TD A[Proceeds] --> B[Segregated
Account] B --> C[Eligible
Projects] C --> D[Impact
Measurement] D --> E[Annual
Report] F[SPO] --> B ``` Market has grown to ~$2.8 trillion cumulative issuance by 2025. Greenium (yield discount vs. conventional) typically 0-8 bps — shrinking as market matures. Greenwashing risk persists where impact reporting is weak.

What is the ICMA Green Bond Framework?

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