Delivering green advisory services

The impact investing market – where investors seek measurable social and/or environmental impact – is now worth more than $US500bn, according to the Global Impact Investing Network, twice its 2018 estimate.¹ As the low-carbon transition takes hold, we’ve also seen enormous growth in the green bond market, which has quadrupled in size since 2014, with $US100bn in issuance in the first half of 2019.² These bonds require the use of their proceeds to be tracked and their impact reported. But measuring and reporting impact requires specific expertise.

Green Impact Advisory

During its initial years as the world’s first green investment bank, GIG developed an industry-leading green impact assessment methodology, providing a template for bestpractice green impact disclosure. While GIG continues to apply these assessments to all of its investments to ensure they support GIG’s green purposes, the growing demand for green advisory services has led to GIG also securing mandates with third-party clients seeking to measure and report their own contribution to a greener economy. In addition to impact reporting, GIG also provides a more flexible Green Impact Advisory service that is adapted to the evolving needs of its clients and the market.

This year, GIG worked with NextEnergy Capital to help the UK-based renewable energy fund manager understand how its activities are contributing to meeting the UN Sustainable Development Goals (SDGs) – an issue of growing interest to current and prospective investors. GIG helped the company develop a new strategy to incorporate SDGs into project assessment, monitoring and reporting.³ That advice drove change in its processes and brought renewed focus to the organisation’s aspirational goals. GIG also advised on the green assessment and reporting for parent Macquarie Group’s inaugural green loan, a £500m facility to support renewable energy projects globally – the first such loan to be issued under the Green Loan Principles. While GIG has produced green impact reports on projects and assets, this marked the first time those methodologies have been used to influence the design of a green loan instrument. Given that most investors typically invest through such products, rather than directly into the underlying asset, the design of this type of instrument with integrated impact reporting could significantly extend the reach of such reporting. 

While a growing number of investors are looking to understand the sustainability credentials of their investments, concerns are rising about ‘greenwashing’, whether intended or inadvertent. Investor uncertainty over greenwashing is acting as a brake on the market. However, the use of robust and transparent green performance data, coupled with easily understood ratings as provided by GIG’s Green Impact Advisory team, can offer reassurance and confidence to investors.

Setting the standard

GIG’s Green Impact Advisory team is contributing to industry-wide initiatives, building some of the market infrastructure upon which future green finance will rest. As a member of the British Standards Institute (BSI) Sustainable Finance Strategic Advisory Group, GIG continues to provide advice to BSI on future priorities for green and sustainable finance standardisation. The team is currently working with BSI on two initiatives: leading the development of an international standard on sustainable finance; and contributing to an international certification standard for green bonds and loans, which will enable issuers to demonstrate that a green debt instrument is funding genuinely green projects. 

This work is not only aligned with GIG’s mission to accelerate the transition to a greener global economy, but it also ensures GIG’s Green Impact Advisory clients have access to global best practice guidance as they seek alignment with, or certification to, these standards.

Green Bank Advisory

GIG is also providing advice to governments and international financial institutions on how they might repeat the success the UK Government had in creating the world’s first green bank. This year’s Green Bank Design Summit saw representatives of 22 emerging markets convene to explore how they could establish their own green banks. Eleven of these markets plan to have a green bank operational within two years. With first-hand experience, from inception through to privatisation, GIG is uniquely positioned to give practical guidance to other jurisdictions planning to set up green banks. 

Among other ongoing commissions, GIG is working with the Mongolian government regarding the creation of the Mongolian Green Finance Corporation, an institution being set up with support of the UN Green Climate Fund. GIG’s advice draws on its unique heritage to provide advice on governance and target investment areas. 

The GIG team has extensive experience working at the intersection of public policy and private investment, both as GIB and now as part of Macquarie Group.

The development of GIG’s advisory business has seen the group take its unique origins and adapt techniques initially applied to its own purpose to meet the needs of a growing green finance sector. By combining its experience as a major investor in infrastructure with the technical in-house capability to advise on green measurement, investment and reporting, GIG is able to meet growing market demand for support at the intersection of finance and sustainability. 

1. Source: Global Impact Investing Network, Sizing the Impact Investing Market, 2019 

2. Source: Climate Bonds Initiative

3. See www.nextenergycapital.com/un-sustainable-development-goals