Green Enabling Projects Guidance
The International Capital Market Association (ICMA) releases Green Enabling Projects Guidance, aiming to provide guidance for the development of green enabling projects to help investors realize the challenges in green project value chain.
Although green enabling projects themselves are not explicitly recognized as green projects, they are crucial to the value chain of green projects. ICMA has developed guidance for green enabling projects based on documents in EU Taxonomy and Glasgow Financial Alliance for Net Zero.
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Introduction to Green Enabling Projects Guidance
The International Capital Market Association believes that determining whether a project belongs to a green enabling project mainly depends on its standards and ultimate use. In terms of standards, green enabling projects need to meet all of the following standards:
- Green enabling projects are a necessary part of the green project value chain: green enabling projects themselves may not necessarily generate positive environmental impacts directly, but they are a necessary condition for the implementation of the green project value chain and a necessary part of the net zero scenario and medium – to long-term transition plan. As the net zero scenario updates, green enabling projects may also change accordingly.
- Green enabling projects cannot support carbon lock-in: carbon lock-in refers to the phenomenon where carbon emissions cannot be effectively reduced due to various restrictions. For example, as existing high carbon emission technologies continue to develop, new low-carbon technologies may find it difficult to replace current technologies. Green enabling projects should not support carbon locking, which makes it difficult for carbon emissions to decrease.
- Green enabling projects need to have clear and quantifiable environmental benefits: The benefits of green enabling projects need to be evaluated based on actual impacts to demonstrate that these projects can have a positive impact on the environment. The International Capital Market Association suggests mapping green enabling projects to qualified green project categories in the Green Bond Principles in order to measure the value of these projects.
- Green enabling projects need to mitigate adverse social or environmental impacts: Green enabling projects should reduce environmental and social risks, and issuers need to ensure that these projects do not have significant adverse effects and comply with sustainable taxonomy. The issuer should identify, manage, and disclose the impact of the project on the environment and society to provide decision-making basis for investors.
After meeting all the above standards, investors also need to consider the ultimate use of green enabling projects. The project may have multiple potential uses, therefore the issuer needs to develop a detailed traceability plan to demonstrate the effectiveness of these projects.
ICMA believes that issuers can incorporate green enabling projects into the use of green bonds based on proportional calculation, and disclose these calculation methods and external assumptions to investors. In addition, the issuer should further disclose information on green enabling projects in the annual report of green bonds, and continuously update and report on project impacts. The International Capital Markets Association suggests that when writing a report, the issuer needs to consider whether the impact of green enabling projects has been recalculated.
Application of Green Enabling Projects
The International Capital Market Association suggests that issuers of green bonds that include green enabling projects can refer Green Bond Principles to confirm the mapping of the projects. ICMA has provided some application cases of green enabling projects:
- In the mining and metal industries, green enabling projects related to electric vehicles belong to the clean transportation under green projects.
- In the construction and equipment industry, green enabling projects related to limiting carbon emissions belong to the pollution prevention under green projects.
- In the chemical industry, green enabling projects related to the manufacturing of building insulation materials belong to the green building under green projects.
- In the telecommunications network industry, green enabling projects related to smart grids belong to the energy efficiency under green projects.
- In the industrial manufacturing industry, green enabling projects related to power grid development belong to the renewable energy under green projects.
Reference:
The Principles Announce Guidance for Green Enabling Projects
