Equinix plans to allocate another $1.2 billion through its fourth green bond offering to fund sustainability initiatives, bringing the company's total green bond contributions to just under $5 billion amid a growing sustainability-focused bond market.

Green bonds are fixed income instruments backed by the issuing company's balance sheet that carry the same credit rating as the issuer's other debts. Green bonds allow enterprises to raise capital to pursue environmental initiatives, Gartner's Research VP Moutusi Sau told SDxCentral.

These bonds are then used to finance projects with "explicit environmental initiative" such as greenhouse gas (GHG) emission reductions or renewable energy projects, she explained.

Nearly $270 billion in green bonds were issued in 2020, according to the Climate Bond Initiative. The green bond market is expected to exceed a $1 trillion in total annual issuance by 2023, Sau said.

Green bonds also "provide a means to hedge against climate change risks while achieving at least similar, if not better, returns on their investment," she explained. In this way, the growth in the green bond market also indirectly works to disincentivize high carbon-emitting projects.

As is the case with most environmental reporting, there's a lack of standardized governance policies for green bonds, and that leads to discrepancies in impact reporting and voluntary certification. This absence of a regulatory landscape paves the way for greenwashing, which occurs when companies make unsubstantiated or misleading claims about the allocation of a green bond or mislabel projects as environmentally-focused when they aren't.

"With this lack of standards or mechanisms to measure impact of green bonds, it becomes hard to verify if the said bonds are actually green or not, and hence greenwashing occurs," Sau said.

To address transparency, Equinix outlines the specifics of the projects its green bonds fund in its Green Bond Impact and Allocation report, Director of ESG and Sustainability Jennifer Ruch wrote in an email to SDxCentral.

Eligible green projects as defined by the vendor in its Green Finance Framework address the following areas: green buildings, renewable energy, energy efficiency, sustainable water and wastewater management, waste management, and clean transportation.

Equinix pursues green bonds because they help connect the company's sustainability strategy with its financing needs. "Through green bond issuances, Equinix strengthens its longstanding sustainability and environmental commitments and utilizes proceeds from the green bond issuance to finance its innovative sustainability initiatives," Ruch said.

"Additionally, issuing green bonds gives credit investors the ability to participate in funding investments in our green assets and support our environmental initiatives," she added.

By 2030, Equinix aims to be climate neutral across scope 1 and 2 emissions, to reduce scope 1 and 2 GHG emissions by 50% based on 2019 data, and to reduce fuel and energy-related activities by 50% based on 2019 data. These targets follow Equinix’s 2015 promise to use 100% renewable energy by 2030.

The vendor plans to release its full-year 2021 sustainability report later this month.