The ethics of Green Bonds... What would you do?

Wednesday 29 July, 2020
by Anonymous

In recent years, Social and Environmental sustainability has been at the forefront of conversation for governments and multinationals, particularly in Australia where extreme weather conditions, such as the  bushfires and floods experienced earlier this year, have brought about deeper conversation on what businesses could be doing better. This first sentence is very long. One outcome of this is that Financial Markets across the globe have taken steps towards a greener perhaps sustainable future with the creation of a market for Green Bonds. 

Green Bonds are fixed income debt intstuments that finance projects. These projects aim to have a positive impact on society by promoting environmental sustainability, such as low carbon and green buildings, renewable energy projects, clean transportation & solar projects. On the surface this emerging green market appears to be the way of the future. 

As a recent graduate and in your first role as a commercial banker at a large financial institution, you are working with your team on a deal with one of your largest clients - an Australian retailer who wants to issue a $400 million green bond. The retailer has stated the proceeds will be used to fund the installation of solar hardware at all service locations and the reduction of plastic wrapping at their stores. This retailer also owns a chain of liquor stores and gambling chains.

While you see the value in Green Bonds, something is not sitting well with you when you learn more about the details of this transaction.  

What would you do?

  • What ethical considerations would you give to this dilemma?

We encourage you to post your answers in the comments so we can create a healthy discussion, with the aim of learning from our peers, becoming aware of differing perspectives and challenging our own biases.

If you would like to submit an ethical dilemma to feature in an upcoming weekly challenge please email: dilemma@thebfo.org.

Comments

There are 2 comments for The ethics of Green Bonds... What would you do? .

Re: The ethics of Green Bonds... What would you do?

Thursday 30 July, 2020
by Stuart
Great dilemma. Australian Ethical invested in the Woolworths green bond but doesn't invest in their shares. When we speak publicly about our decision, we're careful to call out our concerns about some aspects of Woollie's broader business, including the pokies. Well designed green bonds give investors an opportunity to use carrot and stick for positive influence. We have decided NOT to invest in some green bonds in other cases where we weren't satisfied that they were genuinely shifting more capital to good things, and where the risk of greenwash was too high. More info here australianethical.com.au/blog/green-bonds-is-woolworths-greenwashing/

Re: The ethics of Green Bonds... What would you do?

Wednesday 5 August, 2020
by David
We should be careful not to "throw the baby out with the bathwater" by making a decision not to invest in something that is designed (hopefully) to progress our desired environmental outcome, simply because we do not agree with everything the company does. ESG is such a wide range of aspects of a large company that it would be naive to think we can solve (or influence) all our desired goals by a single means. Financing transitions is critical to moving to a low carbon operating environment.

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