to identify green investment activity and avoid greenwashing. It was not about transi- tioning companies. It was about how we ena- ble those companies to transition as an investment activity.
This is what the EU and UK taxonomies are designed to identify, to facilitate the flow of funds into that activity. So, we all have to report on how our funds are delivering on that investment activity.
That is where green bonds could come into favour from that perspective. Rightly or wrongly, we will be able to report a number based on the projects rather than a company. For our impact reporting, we want to present a number of investing activities for the bond, and outside of the bond here is the number for the corporate. It is up to the individual investor to decide where they sit on that spectrum. It is right to give them those numbers, but you do not see that in any green bond report. Thompson: More transparency is better. Gourlay: Why didn’t Vodafone’s bond pass muster? Is it because it is not actively helping the environment?
on investors who receive tax credits from green bonds instead of interest payments. The government could introduce some- thing like that. Petheram: For our Ecology funds, we focus on issuers we feel are delivering these solutions. If a company is issuing a green bond alongside a conventional bond and that issuer is offering those solutions, I will buy the bond that is better value. Vodafone, which did not pass our green bond framework, issued two conventional and a green bond on the same day with no pricing difference. The money goes into the same bank account. Fast forward 12 months, you probably will find reporting advantages from the green bond market as the UK Taxonomy comes in. Thompson: Tax advantages make more sense to me. What is the objective of better reporting? Petheram: We have talked about labelling, the point of which is
12 June 2022 portfolio institutional roundtable: Sustainable debt
One of my other issues when looking at a green fund is that they have a couple of bonds which are pro-actively trying to help the envi- ronment and then bonds which are neutral in that they are not harming the environment. Petheram: For us, when we sat down with Vodafone, it came down to intentionality. I have looked at telcos for 15 years and not one has said they are building a network upgrade for the environ- ment. Now, suddenly, they are.
It is about increasing bandwidth and data usage. From a social perspective it is quite interesting, but the intentionality was not there from a green perspective.
It is also controversial to claim that network upgrades are more efficient and save energy. Network upgrades encourage people to use more data. Gourlay: I have a big issue with companies like Meta. The impact on the environment is almost Scope 2³, it is not direct. Would green bond funds consider that? Petheram: Put it this way, I see telcos throughout my competitor funds. Forest: The first pillar of green bond analysis is issuer analysis. Then we make a use-of-proceeds analysis. We need consistency between what an issuer says and what they are doing with the green bond to avoid greenwashing.
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