ADD2649 Green Bond Framework - Procurement of Second-Party Opinion (SPO) Reviewer

1.1.    Climate change is increasing the frequency and intensity of extreme weather and associated impacts to human and natural systems such as health, food production and species loss. As a result, the Mayor declared a climate emergency for London and brought forward London’s net zero target from 2050 to 2030. To support this goal, the Greater London Authority (GLA) commissioned experts to help determine how this could be achieved. Of the four pathways modelled to get to net zero, the Mayor’s preferred option is the Accelerated Green pathway , as it balances urgency, ambition, social justice and deliverability. 
1.2.    Supporting this ambition and the Mayor’s wider environmental goals will require considerable investments in capital infrastructure across London’s buildings, energy networks and transport systems. To facilitate this, the Mayor will establish a debt fund called the Green Finance Fund (GFF)  , to accelerate investment in green projects from the GLA Group and strategic partners across London. It will be managed internally by the GLA’s arms-length, regulated subsidiary, London Treasury Limited (LTL). 
1.3.    Financing for GFF will initially come from GLA’s own cash resources. However, subject to favourable bond market conditions, the GLA will launch a green bond programme, with the proceeds being used to refinance any initial commitments made from the GFF. Further bond issuance under the programme would finance any new projects identified. 
1.4.    One key requirement of issuing a green bond is that they are issued under a third-party approved green framework. This framework has been developed in conjunction with Lloyds Banking Group and now requires SPO review. 
1.5.    The Framework describes how the GLA will finance expenditure that is critical to tackling the climate crisis and other environmental challenges, through the issuance of green bonds. Furthermore, it provides investors and stakeholders with assurance that funds will be allocated to robustly evaluated environmentally sustainable activities and defines the projects eligible for financing with bond proceeds under the Framework. The Framework aligns with the Green Bond Principles as published by the International Capital Market Association (“ICMA”). A draft version of the framework was included at Appendix 5 in Mayoral Decision (MD) 3128, approved in April 2023. 
1.6.    Approval is now sought to competitively procure a second-party opinion (SPO) review for the GLA’s Green Bond Framework. In accordance with the GLA’s Contracts and Funding Code, the contract will be competitively tendered on the basis of three written quotes being obtained. 
 

2.1.    The primary objective and outcome of this work is to align with current market practices which dictate that the framework is required to be assessed by a SPO reviewer. The SPO provides investors and other stakeholders with assurance that the framework is aligned to accepted green bond principles and that the proceeds of the bond are aligned to market practices and expectations.

3.1.    The public sector equality duty requires the identification and evaluation of the likely potential impacts, both Under Section 149 of the Equality Act 2010 (the “Equality Act”) as public authorities, the Mayor and the GLA must have due regard to the need to eliminate unlawful discrimination, harassment and victimisation, and to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not. Protected characteristics under the Equality Act comprise age, disability, gender re-assignment, pregnancy and maternity, race, religion or belief, sex, sexual orientation, and marriage or civil partnership status.
3.2.    The Green Bond Framework sets out how the GLA intends to finance activities that will support the Mayor’s carbon reduction and environmental goals, through the issuance of green bonds. This will deliver multiple benefits to all Londoners through supporting a Green Recovery, driving a just transition and tackling inequalities such as poor air quality and fuel poverty.
 

4.1.    This work is driven by the Mayor’s Environment Strategy, which sets ambitious targets across several aspects of the environment and supports the Mayor’s priority to secure more than £500 million for investing in climate action by issuing green bonds. 
4.2.    As part of the GLA Group budget proposal for 2023 – 2024, ‘Climate Budgeting’ was introduced across the group. This set out how organisations including TFL, the MPS and the LFB could achieve net zero carbon by 2030 across their operations. The GFF will look to support these bodies in their transition to net zero. 
4.3.    TfL Procurement have been consulted on this proposal and the procurement methodology proposed is in accordance with the GLA’s Contracts and Funding Code.
4.4.    GLA Officers are not aware of any conflicts of interest in the drafting of this form nor any others that may undermine the award of this work.
 

5.1.    This decision requests approval for expenditure of up to £25,000 to procure a second-party opinion (SPO) reviewer for the GLA’s draft Green Bond Framework. This will be funded from the Treasury Services budget in 2023-24.

MD3128 Treasury Management Strategy Statement and GLA investment subsidiary matters for 2023-24