After not reporting anything for three years, the company finally published its 2021/22 Impact Report in May 2025 with the allocation for the bonds issued in January 2022. Still missing is its allocation reporting for bonds issued in January 2023, and impact reporting for recent years.
According to a recent article,[2] a spokesperson for the company said: “We take our reporting responsibilities seriously and on this occasion we have fallen short of meeting expectations. We are in the process of collecting and verifying the data and remain committed to releasing the reports as soon as is feasible.”
For a company in clear financial distress, it may not be a priority for Thames Water to satisfy reporting obligations for its green bonds. What might this mean for investors?
What did Thames say it would do?
The Sustainable Financing Framework 2021 states: “Allocation reporting will be available to investors within the financial year following the date of issuance of each Sustainable Financing Instrument” and “We will annually […] provide investors with information within our Annual Impact Report regarding the environmental or social impacts of the projects funded by the outstanding Sustainable Finance Instruments.” It would appear that this has not been done.
The Second Party Option (SPO) states: “DNV can confirm that Thames Water has committed to publishing information on both the allocation of proceeds raised from Sustainable Financing Instruments, and on the environmental and social impacts from the Eligible Projects funded by these proceeds”, and also mentions annual reporting.
The limited assurance published in May 2025 does not cover reporting but concludes: “On the basis of the work undertaken, nothing came to our attention to suggest that the Selected Information is not fairly stated and has not been prepared, in all material respects, in accordance with the Criteria”, without any assessment of adherence to reporting principles.
While the reporting commitments in the financing framework sound straightforward, the relevant bond documentation states: “The Issuer is expected to issue a report (“Impact Report”) on matters described in the section titled “Use of Proceeds”.” This statement is followed by a range of disclaimers that seek to protect the issuer and other parties if green bond expectations are not met.[3]
What does this mean?
Where green bonds have been bought with specific allocation or impact objectives in mind, in this case the lack of reporting means a key method of verification is unavailable. Labelled bonds are marketed to investors as instruments with sustainability benefits. In this context, the value of green bonds is often tied to timely disclosure, and this benefit is not being provided here. One could call this a “thematic default” as a core disclosure part of the green bond value proposition is not fulfilled.
Green bond assessment: As we see it, analysis of frameworks leading to a green bond classification is conducted prior to issuance, with far less focus on meaningful ongoing monitoring or tracking to see if the commitments around proceeds allocation or reporting are met. For example, the 2023 issued bond is still adorned with the ‘Bloomberg green leaf’, despite the allocation reporting being behind schedule. Failing to meet reporting requirements is an easily observable measure that could be considered a route to losing the certification.
Index inclusion: Green bond indices typically have reporting requirements for eligible securities. For instance, FTSE highlights “A bond will be removed from the index if the issuer fails to release a post issuance report publicly in the 18 month period since the issue date” for its Impact Bond Index Series.[4] Based on our interpretation, some green bonds issued by Thames Water (e.g. XS2576550672, XS2576550326) fall into this category and we assume they were removed accordingly.
Pricing: Investors often speak of the value they assign to enhanced reporting from green bond issuers, as perhaps justifying the illusive ‘greenium’. All else being equal, a green bond that is not delivering this should be priced accordingly. In this specific case, it’s difficult to observe pricing differentiation given the broader credit situation of Thames Water. But more generally, water companies have issued sizable amounts of labelled debt based on sustainability commitments.
Investor demand: Depending on their mandate, active green bond funds could usually still hold off-benchmark instruments, where passive funds would sell them. However, where the overall fund investment thesis is restricted to green bonds, we query if this would be appropriate. In terms of broader ESG-investment criteria, a green bond ‘thematic default’ could be relevant as part of the issuer assessment. A reduction in investor demand can also be negative for bond prices.
We note that Thames Green bonds are still included in some actively managed green bond funds (for example Achmea IM Euro Green Bond Fund), and also ESG-labelled Article 9 funds (for example Robeco Climate Global High Yield Bonds).[5]
What could happen next?
Thames Water has a lot on its mind. Nevertheless, timely allocation and impact reporting was promised to green bond investors, and they have been let down.
We are of the view (and believe it is in the best interest of the company) that Thames Water should be transparent with investors about when this reporting can be expected, specifically the allocation of the green bonds issued in January 2023. At least, the issuer should indicate a timeline, not just state “as soon as is feasible”, to improve transparency and accountability.
At the same time, asset managers and other investors should also be transparent with their end clients that sometimes use-of-proceeds bonds fail to deliver, and there should be clarity around how such situations are being handled. In this context, we remind investors that Sustainability-Linked Bonds embed reporting requirements and financial penalties directly into bond prospectuses and could be a route to rebuilding confidence in the water sector.[6],[7]
All this supports methodologies that can incentivise issuers to meet their reporting and transparency commitments. Where improved impact or transparency makes assets more attractive, and this can lead to lower borrowing costs, then there can be a motivation for issuers to provide this information. Developments in green bond carbon accounting approaches could support such feedback loop.[8]
[1] "Thames Water faces collapse as crisis talks take ‘longer than expected’", The Guardian, 3 Dec 2025.
[2] “Water companies have borrowed over £10bn in ‘green’ bonds”, Unearthed, 30 Nov 2025.
[3] “Any External Review, Impact Report and the Sustainable Financing Framework are not, nor shall they be deemed to be, incorporated in and/or form part of this Prospectus. […] The Bondholders have no recourse against the Issuer, the Arranger, any Dealer (or any of their respective affiliates) or the provider of any such opinion or certification for the contents of any such opinion or certification. […] In particular, no assurance or representation is or can be given to investors by the Issuer, the Arranger, the Dealers (or any of their respective affiliates) or any other person that an External Review and/or the Sustainable Financing Framework and/or any Impact Report will reflect any present or future investor expectations or requirements as regards any investment criteria or guidelines with which such investor or its investments are required to comply […] The Bondholders have no recourse against the provider of any External Review and/or the Sustainable Financing Framework and/or any Impact Report. In addition, although the Issuer may agree at the time of issue of any Green Bonds, Social Bonds or Sustainability Bonds to certain reporting and use of proceeds obligations it would not be an event of default under the Bonds if the Issuer fails to comply with such obligations.”
[4] “FTSE Impact Bond Index Series”, LSEG, Jun 2025.
[5] All fund holding details are from Bloomberg.
[6] "Rebuilding confidence in the UK water sector", 25 Feb 2025.
[7] "The Forensic Carbon Accountant: green bond carbon footprint", AFII, 28 Jun 2023.
[8] "Accounting for greenhouse gas emissions", BNPP AM, 13 Oct 2025.
