Money managers and their trade association have set out 10 key features they want to see from the U.K.'s first sovereign green gilts.
The U.K. government has committed to launching green gilts this year to help the country meet its net-zero pledge by 2050.
The Investment Association Friday set out the industry's wish list for green gilts to ensure issuance meets the government's funding needs and the needs of investors.
Requirements include legal documentation explicitly noting how proceeds will be used to ensure that financing goes to projects aiming to achieve an environmental and social benefit; that green gilts are medium- to long-dated, matching the timelines of projects they are invested in and meeting long-term investment needs of pension funds; and that they are forward-looking, providing a long-term financing path for future projects.
Other requirements include that there is a social impact element to the green gilts and that an audit committee scrutinizes processes associated with green bonds and their objectives.
"The green gilt has the potential to provide much-needed investment into sustainable projects and businesses, while providing long-term returns for savers," Galina Dimitrova, director for investments and capital markets at the Investment Association, said in a news release accompanying the wish list. "We're already seeing a strong level of demand from customers for responsible investment products and look forward to working with government and our members to turn the proposed green gilt into a reality."
The remaining five requirements are for mandatory verification that bonds are in line with market standards; annual reporting on the gilts by the government; continuous engagement between the government and money managers regarding project progress; that existing frameworks such as those around the sustainable development goals are incorporated into the green gilts; and that green gilts have otherwise equivalent features to conventional bonds, such as being issued in inflation-linked and fixed-income formats.
