DORE An issuer’s sustainability credentials are becoming more important to investors – as they should be. Green and other labelled products play a very important role in catalysing a change in investor and issuer behaviour towards more transparency, which is at the heart of the evolution of the sustainable market.

Labels are helpful and a very useful first step. They helped change issuer and investor behaviour and created an infrastructure that has propelled the sustainable-bond market through transparency.

As investors focus more on issuers’ overall sustainability credentials, we can move beyond looking only at a small part of an issuer’s activities to considering the environmental, social and governance (ESG) profile and purpose of the issuer as a whole.

REZNICK Focusing too much on product is like losing the forest for the trees. What we’re interested in is companies moving from brown to green, or from weakness to strength. Green bonds are interesting and they are also part of the solution, but they are not all of the solution.

There is a free-ride challenge here. Some companies can sit on the sidelines and expect to follow the leaders, but the problem will not be solved if five of the 10 companies that need to step into the centre don’t do so.

This is why I believe regulation, and initiatives like the UN sustainable development goals (SDGs), will keep companies and countries committed. Of course, we want to back the bond issuers that are taking the lead. But we are also committed to backing the companies that are underengaged or that are followers.

We understand the challenge for companies, though. We are asking them to invest. They don’t always see why they should bother, if someone bigger is doing it. This requires engagement, conversations and human capital. In order to get companies involved we must speak the language of companies in terms such as cost of capital, regulation and carbon tax.

EELES The key is the investor holding the issuer to account on its transition. Many companies have issued green bonds and this reflects part of their move to integrating a greater sustainability focus within elements of their businesses.

This is a good thing. However, others have issued green bonds to latch on to market developments and this hasn’t really changed anything: it’s just helping another part of their business become more efficient without having an impact in the medium term. Investigating the issuers and finding out how their business is changing and how they are integrating factors within their business outlook is key.

BILL I am not convinced we are heading in the right direction. Regulation is becoming more detailed on aspects which in my view don’t change the carbon footprint of humankind. We are now going to discuss whether green bonds should be able to finance the operating costs of green projects alongside pure investments. I am not convinced this will contribute to carbon savings.

There are clearly investors around this table who take this topic very seriously and are acting as such. They appear to believe that overall borrower profile is more important than whether it is issuing green bonds. But other asset managers can be cynical about their approach to green bonds – with a mandate on one side and on the other a fiduciary duty to optimise yields or a view that they will only buy if doing so isn’t coming at a cost.

In my view, there is a structural deficiency among investors that focus on green bonds rather than looking at overall issuer profiles. Only those that really care about this will push the discussion forward and therefore at best they will see green bonds as a transitory token to raise awareness, among polluting industrials for instance.

At some point in time politicians will need to muster up the courage to explain to voters why they are taking necessary steps that will inevitably make products more costly and cause some job losses. The planet will not survive if we continue to let these companies operate in the ways they have been. At the very least they have to be forced to internalise the negative externalities they are creating.

At the end of the day, green bonds will not do the trick. Something like a carbon tax will do it.

SEVERINO Through the green-bond principles, the borrower is required to be transparent around use of proceeds from labelled issuance. This is an incredibly sound principle.

Now this has expanded to the areas of social and governance. Professional investors have always considered these aspects. But now, as they become more mainstream, end investors can have greater say in their own capital allocation.

Greater transparency will allow money to force companies to behave in a certain way, rather than the government. I think this innovation of greater transparency around ESG factors becomes a powerful tool in mobilising capital towards achieving the SDGs.