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Bonds Act. 12 Nov 2020

What is the Nasdaq Sustainable Bond Network?

Green bonds have been building a solid reputation among investors. Since December 2019 green bonds can be traded openly and transparently online. This is how the Nasdaq Sustainable Bond Network (NSBN) – the first electronic marketplace where professional traders can buy and sell sustainable, social and green bonds – works.

Green bonds are issued to exclusively finance projects related to ecology, sustainability and social initiatives across the world and are becoming increasingly popular among investors. Beyond profitability, the reason is very clear: they represent an investment capable of making a positive impact on and delivering a clear benefit to society. Since the World Bank issued the first green bond back in 2008, these products have attracted growing interest from both business organizations of all sorts and private investors.

To an extent such that it has triggered their most innovative aspect. Green bonds are issued in accordance with transparency and technology principles, such as the agreement between BBVA and insurance company Mapfre to use ‘blockchain’ in the structuring of a €35 million euro bond to finance projects related to the UN Sustainable Development Goals (SDGs).

Less than a year ago, the Nasdaq group, the company that controls the world’s second largest automated stock exchange and New York’s largest, the Nasdaq Sustainable Bond Network (NSBN) made its debut. The NSBN is the first professional and exclusive venue for negotiating the purchase and sale of sustainable, social and green bonds.

The NSBN, as it states in its own press releases, is an online space that provides sustainable bond issuers around the world with a platform to disseminate key information and data on their specific bonds. Thus, it offers investors the information they need to successfully compare sustainable bonds. The goal of the open-to-all network utilized by the NSBN is to offer issuers with an opportunity to showcase their sustainability activities and, above all, boost transparency.

The network also boasts automated online tools to aggregate and address the necessary data. In line with this focus on transparency, issuers are required to disclose key documentation related to the sustainability of their bonds: framework, external review, assurance reports, and allocation and impact reports, as well as project categories, project category allocation, and impact metrics.

Criteria for participation in the NSBN

The NSBN is open to organizations seeking to issue this type of securities, but there four requirements need to be met in order to be included in the network, namely:

  • The Issuer must clearly identify the particular green, social or sustainability standards with which it purports to comply, such as the Green Bond Principles (GBP).
  • The Issuer must submit for publication on the NSBN a document that explains the manner in which it intends to allocate bond proceeds, taking into account the project they are linked to and the way in which revenues will be distributed.
  • At least once a year, until the proceeds of the bonds have been fully allocated, the issuer must submit an update on the use of the bond proceeds.
  • If the Issuer makes any material change or update, the Issuer must submit to the NSBN for publication.

The NSBN is a natural expansion of the existing sustainable bond market, launched in 2015 and currently lists over 200 green bonds. Since then, the concept has spread to all European exchanges operated by Nasdaq. This electronic market is aligned with the Green Bond Principles (GBP) and operates under the guidelines of the International Capital Markets Association (ICMA), which also acts as a secretariat. NSBN’s global advisory board is comprised of major public and private investors, issuers and organizations, including Allianz Global Investors, Freddie Mac Multifamily, The Nordic Investment Bank and The San Francisco Public Utilities Commission, among others.

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