Green Bonds

Green bonds are debt instruments issued to finance projects with a positive environmental impact. In essence they work like any other bond: a company or entity raises capital from investors and commits to repaying it with interest within a set period. The difference lies in how the money is used. With a green bond, the proceeds can only be allocated to previously defined sustainable projects.

It is important to understand one key nuance: a green bond finances specific projects, but it does not certify that the entire issuing company is sustainable.

What they are used for

Green bonds help finance investments linked to the ecological transition without relying solely on internal resources. They are typically used for:

• Renewable energy installations
• Energy efficiency improvements
• Fleet electrification
• Sustainable water management
• Circular economy projects

For companies, they are a way to align financing with climate strategy while attracting investors that apply ESG criteria.

How they work

Issuing a green bond is not simply a matter of labelling financing as green. It requires structure and rigour. The process typically includes:

• Clearly defining which projects will be financed
• Developing a green financing framework
• Submitting it to an independent external review
• Periodically reporting how the funds have been used and what environmental impact has been generated

Transparency is key. Investors want to see data on emissions reductions, energy savings and efficiency improvements.

Regulatory framework

The green bond market is supported by international standards and, in Europe, by an increasingly defined regulatory framework. The main references are:

• The Green Bond Principles of the International Capital Market Association (ICMA), the voluntary global benchmark since 2014.
• The European Green Bond Standard (EuGB), established by Regulation (EU) 2023/2631, which became available to issuers from December 2024 as a high-quality voluntary label.
• The EU Taxonomy, the classification system the EuGB relies on to define which activities qualify as environmentally sustainable.

In the European context, alignment with the Taxonomy and independent verification are crucial to ensure credibility and avoid greenwashing. It is also important not to confuse green bonds with sustainability-linked bonds, which tie the cost of financing to the achievement of corporate ESG targets but do not necessarily finance specific projects.

Why they matter for companies today

Sustainable finance is no longer a marginal trend; it is embedded in the strategy of investors, banks and regulators, and it shapes metrics such as the banking Green Asset Ratio. At the same time, rules such as the CSRD and the ESRS are raising the bar for environmental data. In this environment, issuing a green bond requires more than good intentions: it requires environmental information that is traceable, consistent and verifiable. For many companies green bonds represent a strategic opportunity, but they are only viable if there is a real capacity to measure, justify and report impact.

At Manglai we help companies measure their carbon footprint and prepare the traceable environmental data that underpins credible green financing and sustainability reporting. Discover how Manglai can help you.