The Need for Green Covenants. Regulating the Green Bond Market

Inhaltsverzeichnis (Table of Contents)

• Introduction
• Green Bonds - a Novel Instrument to address Climate Change
  • Connecting Finance and the Environment
  • Operation of a Green Bond
    • World Bank Green Bonds
    • Clean Renewable Energy Bonds
    • Transport for London
    • NRG Yield, Inc.
• Introducing Green Covenants
  • Determining the Shade of Green
  • The Need for Green Covenants
  • Simple Enforceability of Green Covenants
  • Why are Green Covenants Necessary?
• Operation of Green Covenants in Comparison with Common Law Instruments
  • Fiduciary Duties
  • Fraudulent Misrepresentation and Securities Fraud
  • Quistclose Trusts
  • Green Covenants as a Superior Solution

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This paper examines the emerging market for green bonds, highlighting their potential to bridge the gap between financial markets and environmental sustainability. It explores the challenges associated with ensuring that green bond proceeds are genuinely used for environmentally friendly projects and proposes the implementation of "Green Covenants" as a solution.

• The growing importance of green bonds in addressing climate change.
• The need for a standardized definition and measurement of "green" projects.
• The role of legally enforceable covenants in ensuring the integrity of green bond investments.
• The comparative analysis of existing legal instruments and their effectiveness in protecting bondholders.
• The potential benefits of Green Covenants in promoting responsible and transparent green bond issuance.

Zusammenfassung der Kapitel (Chapter Summaries)

The paper begins by introducing the concept of green bonds and their role in tackling climate change. It explores the rapid growth of the green bond market and the associated risks, both for the environment and for bondholders. The paper then introduces the concept of Green Covenants, emphasizing their importance in ensuring the integrity of green bond investments.

Chapter 2 delves into the operation of green bonds, providing examples from various entities, including the World Bank, Clean Renewable Energy Bonds, Transport for London, and NRG Yield, Inc. It highlights the shortcomings common to these bonds, which can be addressed by implementing Green Covenants.

Chapter 3 further explores the need for Green Covenants, discussing the challenges of defining "green" projects and the importance of legal enforceability. It provides a rationale for why Green Covenants are necessary to protect both the environment and the interests of bondholders.

Chapter 4 compares the effectiveness of existing legal instruments, such as fiduciary duties, fraudulent misrepresentation, and Quistclose trusts, in safeguarding bondholders' interests. It argues that Green Covenants offer a superior solution by providing a stronger legal framework for ensuring that bond proceeds are used for their intended purpose.

Schlüsselwörter (Keywords)

Green bonds, climate change, environmental sustainability, Green Covenants, legal enforceability, fiduciary duties, fraudulent misrepresentation, Quistclose trusts, bondholders, environmental protection, financial markets, sustainable finance.