Green Bond Financing; The Role Of Certification And Regulation In Ghana’s Growing Bond Market.

Green Bond Financing; The Role Of Certification And Regulation In Ghana’s Growing Bond Market.


Green bond financing has emerged as a significant instrument in the contemporary financial landscape, contributing to the improvement of the world. It is employed in funding initiatives beneficial to the environment, while addressing critical concerns such as climate change.


The green bond market marks a significant shift in how corporations and governments manage their finances, offering an ingenious funding approach for environmental projects, encompassing diverse sectors including renewable energy, efficient energy use, and sustainable water and waste management. The notable growth in the green bond market reflects a shared dedication to creating a future that is more sustainable, resilient, and environmentally conscious.

Presently, numerous investors seek avenues to invest in socially responsible and eco-friendly projects. This surge in interest has propelled the expansion of the green bond market. However, for its optimal functioning, clear regulations and certifications are imperative.


By virtue of the dynamism of the current financial landscape, certification mechanisms assume a pivotal role by furnishing investors with a standardized framework to evaluate the environmental impact of their investments. Leading organizations such as the Climate Bonds Initiative (CBI) and the International Capital Market Association (ICMA) have spearheaded certification processes that rigorously assess the environmental integrity of green bonds.[1] These guidelines and certifications play a pivotal role in ensuring the reliability, transparency, and efficacy of the green bond market, thereby facilitating substantial positive changes for the environment.

Certification is essential to ensure that the green bonds are authentically directed towards environmental sustainability.


Various forms of certification exist including:

  1. The Green Bond Principles;
  2. Climate Bond Standards;
  3. Green Bond Indices;
  4. Second Opinions;
  5. Credit Rating Agencies; and
  6. Green Bond Assessments.

Green Bond Principles

The Green Bond Principles (GBP) introduced by the International Capital Market Association (ICMA), aims to ensure transparency, credibility, and integrity in the market. GBP guides issuers in disclosing information about the environmental projects funded by the bonds. Key components include the use of proceeds, process for project evaluation and selection, management of proceeds, and reporting.[2]

Climate Bonds Standard

The Climate Bonds Standard is another certification that focuses on projects helping with climate change and helping investors make climate-friendly investment choices. It has two parts – one explaining how to manage and report, and another listing the criteria for different sectors to be eligible.[3] Bonds can be certified before and after they are issued, and issuers need to report each year on the projects the bond funds.[4]

Green Bond Indices

Green bond indices are essential for investors looking to evaluate the overall success of eco-friendly investments and to build portfolios aligned with their environmental values. Indices such as Barclays MSCI, Bank of America Merrill Lynch, S&P, and Solactive, act as benchmarks to assess the performance of environmentally focused bonds in the market.[5] These indices select bonds based on specific environmental criteria, emphasizing sustainability and climate-related projects.[6] This contributes to transparency in the expanding green bond market.[7]

Second Opinions

Issuers of green bonds are encouraged to seek external assurance to confirm their alignment with key features. Various independent institutions, such as Deloitte, EY, KPMG, Oekom, Sustainalytics, and Vigeo, provide “second opinions” on the environmental credentials of bond issues, with CICERO, a leading climate research institute in Oslo, being a prominent provider.[8] Notably, CICERO distinguishes itself by offering a nuanced assessment, categorizing projects into “shades of green” – light green for environmentally friendly projects, medium green for steps towards a long-term vision, and dark green for projects applying future solutions.[9]

Credit Rating Agencies

Major credit rating agencies, renowned for their detailed assessments of credit risk in bond markets, can play a role in certifying green bonds. Credit rating agencies like Moody’s Investors Service have established credibility in providing granular assessments of credit risk in bond markets. These agencies can play a role in certifying green bonds as demonstrated by Moody’s introduction of methodologies such as, “Green Bond Assessments” (GBAs) to evaluate the likelihood of bond proceeds supporting environmentally friendly projects.[10] Moody’s GBAs involved quantifiable factors in five key areas, enhancing transparency and replicability, with consideration of additional factors that may impact future performance.[11]

Green Bond Certification in Ghana.

Presently, there are no certifications to standardize the assessment of environmental impact for investors. However, Ghana’s Securities and Exchange Commission (SEC) has taken steps to ensure certification by adopting the Green Bond Principles (GBP) formulated by the International Capital Market Association (ICMA) in the Draft Securities Industry (Green Bond) Guidelines 2023. This will be discussed in the subsequent paragraphs.


While certification establishes benchmarks, the regulatory framework plays a complementary and equally crucial role in ensuring market integrity, safeguarding investor interests, and fostering overall stability.  As such governments and regulatory bodies worldwide are increasingly recognizing the imperative of establishing clear guidelines for green bonds to nurture a robust and trustworthy market.


Green bonds in Ghana are governed as a fixed income instrument under the Ghana Fixed Income Market Rules 2022, which cover not only green bonds but also a broader category of debt securities. The Securities and Exchange Commission (SEC) is actively taking steps to issue the Securities Industry (Green Bond) Guidelines 2023, which will provide more specific regulations for green bonds. These guidelines aim to incorporate approaches that ensure issuers are afforded transparency and disclosure.


The Ghana Stock Exchange (GSE)  has recently introduced the Ghana Fixed Income Market Rules (GFIM) under its securities market license,  which have been approved by the Securities and Exchange Commission (SEC) in line with the Securities Industries Act, 2016 (Act 992) as amended.[12] These rules provide a transparent and efficient framework for trading various debt securities, including green bonds.[13]

Green bonds are fixed income instruments whose proceeds finance projects in line with environmental benefits , guided by accepted Green Bond Guidelines and Standards such as GBP, CBI, with  others endorsed by the GSE and SEC.[14]

While the GFIM rules align with accepted Green Bond Guidelines and Standards, the GFIM rules, do not reflect any of the reporting methods recommended by the GBP or CBI. In light of this lacunae, the SEC has proposed additional guidelines in the form of the Draft Securities Industry (Green Bond) Guidelines for 2023 to ensure transparency and disclosure for issuers.


In response to the growing traction green bonds have gained, Ghana’s Securities and Exchange Commission (SEC) in accordance with its objects and functions provided for in Securities Industry Act, 2016 (Act 929) as amended intends to issue the Securities Industry (Green Bond) Guidelines 2023 (“Guidelines”).[15]

The draft Guidelines aim to establish a regulatory framework for green bonds issuance, aligning with the June 2021 Green Bonds Principles (GBP) by the International Capital Market Association (ICMA). It pursues three key objectives: fostering the development of a domestic green securities market in Ghana, ensuring the credibility of green securities through transparency and quality, and preventing “greenwashing” by discouraging exaggerated or misallocated environmental benefits in green bonds. Issuers of green bonds including public companies, external companies, supra-national institutions, local government authorities, and statutory corporations, will in addition to complying with Act 929 and the Securities and Exchange Commission Regulations, 2003 (LI 1728), be required to mandatorily comply with the Guidelines.[16] The proposed mandatory application of the Guidelines distinguishes it from the voluntary nature of the GBP. In spite of the proposed mandatory application however, the SEC may grant an exemption, partial exemption or waiver subject to Act 929.[17]

The draft Guidelines adopt the four core components provided by the GBP. These core components are use of proceeds, process for project evaluation, management of proceeds and reporting.[18] In addition to the core components, the  Guidelines make provision for independent review as well as approval processes, disclosure obligations and penalties. These will be discussed in more detail below.

Use of Proceeds

Green bonds are a popular way for companies to fund projects with a positive environmental impact. However, the green bond proceeds must be used appropriately. The draft Guidelines mandate that the green bond proceeds can only be used for projects with a positive environmental impact, in areas such as renewable energy, energy efficiency, pollution prevention, sustainable land and resource management, biodiversity conservation, clean transportation, climate change adaptation, circular economy initiatives, green buildings, and sustainable water and wastewater management.[19] Proceeds from the issuance of green bonds will be prohibited from being used to finance any projects related to production or trade in tobacco, weapons, alcoholic beverages, gambling among others.[20] In cases where proceeds may be used for refinancing, the issuer will be required to provide details on the share of financing and refinancing, specifying the investments or project portfolios eligible for refinancing and the expected look-back period for eligible green projects.[21] The issuer will also be mandated to define relevant indicators for quantifying the expected impacts of projects financed by green bonds.[22]

Process for Project Evaluation

In accordance with the project evaluation and selection procedure, the proposed Guidelines specify that the assessment and selection process for projects must be clearly defined, accurate, and transparent.[23] This applies to the project’s objectives, environmental consequences, eligibility criteria, and the procedure for recognizing and addressing potential environmental risks linked to the projects.[24]

Management of Proceeds

The draft Guidelines provide that the management of green bond proceeds will involve crediting the net proceeds to an account dedicated to the green bond project or allocating them to sub-projects if applicable.[25] If there are no specific sub-projects, the issuer will be required to track the proceeds in an appropriate manner, attested through a formal internal process linked to the issuer’s operations for eligible green projects.[26] Periodic adjustments to the balance of tracked net proceeds are necessary to align with allocations to eligible green projects.[27] The issuer is required to disclose the intended types of temporary placement for unallocated net proceeds in the offer document, along with the targeted ramp-up period to achieve full allocation to green projects.[28] Additionally, the external auditor must report on the issuer’s internal tracking method and the allocation of funds from the green bond proceeds to selected projects.[29] Upon the issue of  the forthcoming Guidelines, green bond issuers will be held accountable for their commitment to funding environmentally friendly projects.

Communication and Reporting

Green bond issuers will be obligated to prioritize public access to project evaluation, monitoring procedures, fund allocation, and external evaluation reports available to the public under the draft Guidelines.[30] Annual updates, or as needed for significant developments, will include a list of financed projects, their descriptions, allocated amounts, expected environmental impact, and unused balances. The issuer will be mandated to employ performance indicators, both quantitative and qualitative, for measuring project results, and disclosing impact details in its annual reports to the Commission, bondholders, and the securities exchange.[31] Consistency in published information is essential, with any changes in impact measurement indicators requiring disclosure, explanation, and a 12-month transitional period. Independent expert confirmation of environmental impacts is also encouraged.[32]

Independent Review

An issuer of green bonds will be required to undergo an independent external review under the draft Guidelines,  to assess the green nature of eligible projects and compliance with related obligations before issuance.[33] This review, aligned with the ICMA GBP, is to be conducted by a qualified and independent expert and submitted to the Commission along with the Green Bond Framework.[34] The issuer may also seek additional assurance through certification or green bond scoring/rating.[35] Post-issuance, the issuer may opt for verification, where an external third party monitors specific aspects against defined criteria.[36] The independent expert or third party is  must possess relevant experience, and their due diligence report should include an assessment of environmental impact, alignment with compliance elements, and evaluation of environmental risks associated with eligible projects.[37]

Approval Process

Issuing green bonds is a highly regulated process that requires adherence to legal and regulatory frameworks. Before issuing green bonds, an issuer will be obligated to undergo an approval process under the proposed Guidelines, which includes submitting a draft information memorandum or prospectus to the Commission and complying with the relevant laws for public bond issuance.[38]

In addition,  issuers are required to disclose a clear description of the types/categories of projects eligible for financing or refinancing, outlining the anticipated environmental benefits in its Green Bond Framework.[39] The disclosure must include the methodology for project selection, evaluation, financing, and the identification and management of environmental risks, especially for infrastructure projects.[40] Additionally, where proceeds are used for refinancing, the framework is required to specify the portion intended for refinancing and provide clarity on the projects or portfolios affected by the refinancing.[41]

Disclosure Obligations

Furthermore,  green bond issuers are mandated to adhere to standard disclosure requirements for bond issuers and fulfill additional reporting commitments outlined in the Green Bond Framework.[42] These requirements include detailing the use of funds, amounts allocated to projects, issuance schedules, and unused balances. Moreover, issuers will be required to promptly disclose major events such as delays in fund utilization, significant discrepancies in environmental impacts, changes in external providers, events affecting project feasibility, and alterations to commitments requiring SEC approval.[43]


The draft Guidelines provide that if an individual violates or fails to adhere to its provisions, the SEC has the authority to take action such as refusing or renewing a license, revoking or suspending a license, issuing a reprimand, disqualifying the individual, or imposing an administrative fee.[44] The specified administrative fee should be paid promptly, within seven (7) days or a timeframe determined by the SEC following the issuance of the order, and it must be no less than GH₵ 600.00 and no more than GH₵ 240,000.00.[45]


Even though certification and regulations are useful, it can be quite daunting, when all other countries have different standards for defining and certifying green bonds. The absence of a universal standard set of regulations poses a challenge to the seamless functioning of the market across borders. Furthermore, regulations must strike a delicate balance between clarity and fostering innovation in green initiatives. Thus, flexibility is crucial to prevent rules from inadvertently hindering the expansion of the green bond market.



In the grand tapestry of green finance, harnessing green bonds to secure funds for genuinely environmentally beneficial projects is crucial. In this intricate system, the certification and adherence to transparent rules are crucial elements. With the continual expansion of the green bond market, active collaboration among stakeholders, including investors, governments, and regulatory bodies, becomes imperative. This collective effort is vital for establishing standardized practices that guarantee integrity, reliability, and sustainable progress. Ghana’s Draft Securities Industry (Green Bond) Guidelines 2023 will hopefully be published in the near future, bringing on board market certainty. Ultimately, a well-regulated and certified green bond market can significantly contribute to steering the world towards a more sustainable, strong, and eco-friendly future.



ERNEST KOFI BOATENG (Trainee Legal Associate)

[1] Green Bond Principles, Voluntary Process Guidelines for Issuing Green Bonds, June 2021, page 4 assessed 16/01/2024.

[2] ibid.

[3] Climate Bonds Standard (Version 3.0, December 2019) assessed 16/01/2024.

[4] ibid.

[5] Torsten Ehlers and Frank Packer, Green Bonds – Certification, Shades of Green and Environmental Risks, 24th August 2016, page 4 assessed 16/01/2024.

[6] ibid.

[7] Nini Johana Marín-Rodríguez, Juan David González-Ruiz and Alejandro Valencia-Arias, Incorporating Green Bonds into Portfolio Investments: Recent Trends and Further Research¸ page 3 file:///C:/Users/BPA09/Downloads/sustainability-15-14897-1.pdf assessed 16/01/2024.

[8] supra, footnote 4.

[9] S&P Global Ratings, What are Second Party Opinions?, (2023) assessed 21/12/2023

[10] ibid, footnote 4; Business Wire, Moody’s Retires Green Bond Assessment Product in Light of Market-Leading Second-Party Opinion Service Available from its Affiliate Vigeo Eiris, (October 22, 2020), assessed 21/12/2023.

[11] Moody’s Investors Services, Green Bonds Assessment (GBA) Proposed Approach and Methodology, (January 14 2016) page. 3$file/MoodysRatingsMethodology.pdf assessed 16/01/2024.

[12] Ghana Fixed Income Market Rules (April 5, 2022) page 8, assessed 23/01/2024.

[13] ibid.

[14] ibid, page 10.

[15] Securities Industry Act, 2016 (Act 992), Sections 2, 3 and 209.

[16] Draft Securities Industry (Green Bond) Guideline 2023, Paragraph 2(3).

[17] ibid.

[18] supra, footnote 1, page 4.

[19] supra, footnote 13, paragraph 3.

[20] ibid.

[21] ibid.

[22] ibid.

[23] ibid, paragraph 4

[24] ibid.

[25] ibid, paragraph 5.

[26] ibid.

[27] ibid.

[28] ibid.

[29] ibid.

[30] ibid, paragraph 6.

[31] ibid.

[32] ibid.

[33] ibid, paragraph 7.

[34] ibid.

[35] ibid.

[36] ibid.

[37] ibid.

[38] ibid, paragraph 8.

[39] ibid, paragraph 9.

[40] ibid.

[41] ibid.

[42] ibid, paragraph 11.

[43] ibid, paragraph 12.

[44] ibid, paragraph 13.

[45] ibid.

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