Which of the following is true about green bonds?

Question

BlackTom AI · Accepted Answer

When evaluating the statement about green bonds, it’s helpful to consider what green bonds are intended to finance.
Option 1: 'Governments are not allowed to issue green bonds.' This is incorrect. Governments, municipalities, and SSA issuers can issue green bonds to fund climate and environmental initiatives, not restricted to private entities.
Option 2: 'Green bond issuers typically have lower quality.' In reality, green bonds come from a wide range of issuers with varying credit quality, and there is no inherent rule that they are of lower quality solely because they are labeled green; credit risk depends on the issuer, not the use-of-proceeds designation.
Option 3: 'Green bonds are only issued in developed countries.' This is inaccurate. Green bonds are issued globally, including by issuers in developing and emerging markets, as a mechanism to mobilize capital for environmental projects worldwide.
Option 4: 'Green bonds’ proceeds are committed to financing climate or environment-friendly projects.' This statement correctly reflects the defining purpose of green bonds: the proceeds are ring-fenced and allocated to climate and environmental projects, such as renewable energy, energy efficiency, clean transportation, and other sustainable initiatives.
Thus, the correct understanding centers on the allocation of proceeds to climate or environment-friendly projects, not on issuer type, country development status, or issuer credit quality alone.

Which of the following is true about green bonds?

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