Green Bond Principles (GBP)

The Green Bond Principles (GBP) are a set of voluntary process guidelines that tell issuers what to do and disclose when they call a bond "green". They are coordinated by the International Capital Market Association (ICMA), a trade body for the international capital market in bonds, and are the most widely used reference for green bonds worldwide. The GBP do not certify individual bonds, do not change the issuer's credit risk and are not law. They describe good practice on transparency: how the money will be used, how projects are chosen, how proceeds are tracked and how results are reported.

The GBP are one of four related ICMA documents, often called "the Principles": the GBP, the Social Bond Principles, the Sustainability Bond Guidelines used for sustainability bonds, and the Sustainability-Linked Bond Principles used for sustainability-linked bonds. Many national and regional standards, from the ASEAN Green Bond Standards to the guidelines for green sukuk, are built on the GBP, and the EU's European Green Bond Standard draws on the same four building blocks while adding legal requirements.

Think of the GBP as a recipe card for honesty rather than a health certificate. A restaurant that follows the card lists its ingredients, says where they came from, keeps them on a separate shelf and tells diners afterwards what went into the dish. The card does not say the food is healthy; it says the restaurant has been open about it.

In the same way, a bond issued "in line with the GBP" means the issuer has explained which green projects the money is for, how it picked them, how it keeps the cash apart in its books, and how it will report back. Investors still have to judge for themselves whether the projects are green enough, but they have the information to do so.

The GBP were first published in January 2014 by a group of banks, with ICMA acting as secretariat, after early green bonds from development banks such as the European Investment Bank (2007) and the World Bank (2008) showed demand for a common approach. They have been updated regularly since, with notable editions in 2018 and 2021, an appendix in June 2022, and the latest edition dated June 2025, which added "activities" to the definition of eligible green projects. Supporting material includes a pre-issuance checklist (2023), guidance on green enabling projects (2024) and a combined guidance handbook.

The Principles are run by an Executive Committee elected each year by members and observers, which include issuers, investors and underwriting banks. That makes them a market-led code, similar in spirit to rules drafted by a self-regulatory organization but without any power to sanction.

1. Use of proceeds. The money must go to eligible green projects, described in the legal documentation. The GBP list indicative categories: renewable energy; energy efficiency; pollution prevention and control; sustainable management of living natural resources and land use; terrestrial and aquatic biodiversity; clean transportation; sustainable water and wastewater management; climate change adaptation; circular-economy products and processes; and green buildings.
2. Process for project evaluation and selection. The issuer should explain its environmental objectives, how projects fit the eligible categories, and how it identifies and manages social and environmental risks.
3. Management of proceeds. Net proceeds should be tracked, for example in a sub-account or sub-portfolio, and any unallocated balance and how it is held should be disclosed.
4. Reporting. Issuers should report at least annually, until full allocation, on which projects received money and their expected impact, using quantitative indicators such as energy saved or emissions avoided where possible.

Two key recommendations sit on top. Issuers should publish a green bond framework explaining how they meet the four components, ideally linked to their wider climate strategy and goals such as those of the Paris Agreement. And they should appoint an external reviewer, typically for a second-party opinion before issuance and a verification of allocation afterwards. ICMA publishes separate guidelines for external reviewers. These checks are normally carried out by specialist firms rather than the issuer's independent auditor, although audit firms also offer assurance.

An issuer planning a corporate bond or sovereign green bond typically drafts its framework against the GBP, obtains a second-party opinion, refers to both in the prospectus and markets the deal to dedicated green investors, many running sustainable investing or impact investing mandates. Index providers and fund managers often require GBP alignment before a bond enters a green bond index, and many investors do their own due diligence on the framework. Reporting templates and impact metrics published under the Principles allow comparisons across issuers, and frameworks frequently map projects to the UN Sustainable Development Goals.

Because the GBP are voluntary and process-based, they do not define how green a project must be. A bond can follow every step of the GBP and still finance projects that critics regard as marginal, such as efficiency upgrades at fossil-fuel plants. Second-party opinions are paid for by the issuer, creating a possible conflict of interest, and impact reporting varies in quality. These concerns led to taxonomy-based standards such as the EU Green Bond Standard (Regulation (EU) 2023/2631, available since 21 December 2024), which requires at least 85% taxonomy-aligned use of proceeds and ESMA-registered reviewers, and to certification schemes such as the Climate Bonds Standard. Supporters say the GBP's flexibility is what allowed the green bond market to grow across many countries and legal systems, and that later standards build on rather than replace them.

• ICMA: Green Bond Principles