Green bonds are bonds where the borrowers have to report on and account for the use of the proceeds (the money received by the issuer of the bond). Green bonds are defined as bonds where the proceeds will be exclusively applied to finance green projects with clear environmental benefits, for example within renewable energy or climate change adaptation. The international standards and control procedures ensure that investors can feel secure about the green effect of the bonds.
Green bonds must meet four requirements:
– The proceeds from green bonds may be used only to finance green projects.
– The bond issuer must clearly describe how each project is selected and evaluated.
– The bond issuer must establish control procedures to ensure that the proceeds are used for green projects.
– The bond issuer must report on the use of the proceeds.
We also invest in the broader social bonds category, where the proceeds are applied exclusively to finance social projects, for example to reduce inequality or otherwise improve the living standard of vulnerable populations, and bonds for other sustainability purposes.
The sustainability bonds that Danica Balance Sustainable Choice invests in are either government bonds or bonds issued by other government authorities (sovereigns, supranationals and agencies bonds).