What is a Pure Play?
A “Pure Play” is known in the market as a company who has > 90% of its revenues from a green activity i.e. wind farm, solar projects etc.
Definition of a Green Bond Issued by a Pure Play?
As per the ICMA GBP* Guidance Handbook:
“Bonds issued by companies whose business activities are exclusively focused on the green economy (i.e. Pure Plays) are only considered as Green Bonds if they are explicitly aligned with the GBP / ICMA Green Bond Principles”
* ICMA = International Capital Markets Association. GBP = Green Bond Principles
The GBP, however, recognises that there is a wider universe of climate and/or environmentally themed bonds of which Pure Play bonds (that are not explicitly aligned with the GBP) may be considered a part of in the overall market.
What is the issue in Relation to Sustainable Finance?
One of the key debates in Sustainable Finance has been in relation whether Bonds issued by Pure Play companies are automatically green.
We believe that while Pure Play companies have mostly green activities their assets and expenditures are not necessarily all green.
Hence a Framework to govern the transaction is best practice to ensure that only certain (expenditures and assets) in the Pure Play business can be labelled as Green. This ensures that a Bond issued by one of these entities aligns with the Green Bond/Loan Principles.
By default, this will cover the bulk of the asset and expenditures in any case so best to issue in specific Green Format with a framework which would generally be considered best practice.
If a Pure Play issues in Green format and the bond is for general corporate purposes rather that specifically being applied to funding Eligible Green asset and expenditures (as defined in the companies Framework) there is the risk that monies are used to items such as salaries that are clearly not explicitly green.
Pure Plays in Bank Frameworks
In addition to the above we do see the Pure Play concept often being used in Banks Frameworks. Banks Green assets are generally loans and in the main asset/project specific.
However, for this part of the market this is an accepted view that banks can provide loans to Pure Play companies for general corporate purposes, even though technically it doesn’t really align with our view of the above.
3 examples that demonstrates this recently…
- Bank Framework such as ANZ and many more
- Pure Play company (Plug Power) issuing in general corporate purposes
- Pureplay Company Issuing with a specific Framework (Sunseap)
