The majority of SFDR- compliant funds are forced buyers of green bonds, which will continue to give the
market a bad name. Christoforos Bikos, Redington
ysis differed from the rating agency. This is why we have active fund management. We have the Green Bond Principles, but we still have to look at the reporting. A green bond was issued, for example, which had not published a report for three years, so we decided not the invest. Bikos: What you define as sustainable may be a portfolio of issu- ers with high ESG scores plus a carbon transition plan. Some- one else may define it as a portfolio of bonds with sustainable development goals. The point is there is no core definition. Forest: You say there is a lack of KPIs in terms of the sustaina- ble development goals. There are also more and more KPIs in social bonds. It is a growing market and in social bonds we have new KPIs to target the sustainable development goals which are not linked to the environment. Loughney: We will come to a standard. It is important because a lot of issuers know people just want to buy green and they will freeload and nothing will be solved.
There will be an improvement, but you will not get to critical mass without a standard imposed from above that allows insti- tutions with the big money to make that decision. Then issuers cannot freeload anymore if they do not conform to that standard.
18 June 2022 portfolio institutional roundtable: Sustainable debt
The standard will not be 100% perfect, but if you get to 70% of what you want to achieve then people who do not adhere to those standards will not get the benefit from issuing green or sustainable bonds. Petheram: We have good standards in the Climate Bond Initia- tive, which have their own taxonomy, but they are not used to the extent they should be. Forest: Let’s be realistic. It is difficult to have the same defini- tion between France, the UK, the US and China. Loughney: China maybe not, but we could in the US, the UK and Europe. Petheram: It is about developing the technologies and develop- ing the investment to facilitate the change. That is what a tax- onomy needs to do. Emmons: Could I pick up on the point about the scope emis- sions? I am excited but nervous about the introductions of scope 4 when there are still so many challenges in evaluating scope 3. There are challenges with understanding and evalu- ating the risks companies are exposed to through their supply chain. Some companies are good at understanding the car- bon footprint of all the inputs into what they are doing, like Apple. Other companies, however, are way off the mark on that.
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