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Hastings Environmental Law Journal

Authors

Bryant Rivera

Abstract

At the 2021 United Nations Climate Change Conference (“COP26”) in Glasgow, nations around the world reaffirmed their international commitment to limit average global temperature increases by the end of the century to 1.5 degrees Celsius. This international effort will require a significant amount of funding, one that will demand a substantial restructuring of the U.S. financial market towards a carbon neutral economy. In recent years, green bonds have emerged as the leading financial instrument to finance environmental projects and initiatives. Although the market has seen unprecedented growth, it is nevertheless inhibited by its lack of regulatory structure, with all disclosures occurring on a voluntary basis. The United States Securities and Exchange Commission has recently announced its intent to reform environmental, social, and governance (“ESG”) disclosure, suggesting the replacement of the current voluntary framework with mandatory disclosure requirements. This paper posits that mandatory disclosure requirements are necessary to eliminate instances of “greenwashing” and increase investor confidence in the green bond market. This is supported by empirical research demonstrating the financial and environmental benefits of certified green bonds compared against uncertified green bonds. Additionally, the rapid development of technology and artificial intelligence poses to reshape the way ESG is understood and calculated. This paper concludes that an increased regulatory framework is necessary to foster the growth of the green bond market, which is critical to supplying the funding required to meet the international goals for limiting temperature increases to 1.5 degrees Celsius.

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