In short, the hot air is cooling. But some big challenges remain: -  On disclosures, to reach the goal of securing a fully consistent, decision useful and forward looking set of metrics requires standard setters to agree on a single framework; for it to be made mandatory; and for corporates to measure, model and disclose;  -  On instruments, we need to see a further scaling up in the range and depth of tools providing credible incentives for green investment and more effective transparency for investors on performance against climate goals. That will drive broader-based price discrimination between climate-positive and climate-negative assets, which in turn will provide powerful incentives for further adjustment; and  -  On asset allocation strategies, we need to coalesce more around terminology and approaches, providing a clear and credible choice for clients and investors, on that journey towards full integration. And we need more research on what works and what doesn’t! Many of the actions here are for the financial markets themselves to resolve – and rightly so, because we want the power of markets working to deliver climate change. But there are important priorities for the public authorities too: to ensure externalities are properly internalised, so markets can do their job; to help co-ordinate and set market-wide standards, and where necessary to make them obligatory; and to use our strength and influence as market participants in our own right to drive change, where doing so is consistent with our mandates.
The first such ‘sustainability-linked bond’ was issued by Enel, an Italian electricity producer, and offered a ‘step up’ coupon penalising the issuer if it failed to meet a specific target for the share of renewable energy in its installed capacity. Such bonds are not a complete answer to the concern of greenwashing: the degree of challenge in the target remains the choice of the issuer, for example, and the use of funds cannot be traced to specific projects in the same way as use of proceeds bonds. But they do illustrate the type of innovation now underway in capital markets. Chart 8: Total green bond issuance  Chart 9: Corporate green bonds outstanding by nationality of issuer  Source: Climate Bonds Initiative (CBI) data (including all selflabelled green bonds aligned with CBI’s Climate Bonds Taxonomy and with at least 95% use of proceeds financing or refinancing green/environmental projects) and Bank  Source: CBI data and Bank calculations. calculations. The billion dollar question, of course, is whether the market is yet discriminating in favour of climate-positive investment, and away from the reverse. There are some encouraging signs from recent primary issuance: green bonds issued by European companies in September priced on average nearly 10 basis points inside existing curves, and tighter than other non-green issuance over the same time period (Chart 11). That’s real money: for example, the average -15bp new issue premium on VW’s recent € green bond issues will save the firm around € a year in interest costs compared to a conventional bond.