Issuance of green bonds for companies working on battling climate change are booming, but investors say the label needs safeguards against bogus proposals that could sour retail buyers and wealth advisers just starting to tune into the securities.

Right now, any debt issuer can label its bonds green, a compelling but unregulated designation for investors concerned about global warming, sustainability and other environmental matters.

Definitions of green bonds vary greatly, with socially conscious mutual funds, insurers and other buyers that now dominate the market using different criteria for investing.

Sellers so far have included a leading American power company, a carmaker and other unexpected borrowers with green projects.

Bankers and activists worry an absence of enforceable standards for what is “green” will stunt a market expanding at 50 percent or more annually and that in 2014 tripled issuance to $36.6 billion.

“The market is at a critical juncture, and it is important that certain standards and certain definitions are maintained,” said Manuel Lewin, head of responsible investment at Zurich Insurance Group, a big green bond buyer with $207 billion of assets under management.

Zurich Insurance aims to invest as much as $2 billion in green bonds. Lewin said what makes a green bond unique is a pre-specified use of proceeds.

“There’s definitely a risk that the green bond label is being misused,” he said.

For example, French utility GDF Suez sold $3.4 billion of green bonds in May, and activists have since claimed the proceeds are being used to fund a dam project they say hurts the Amazon rainforest in Brazil.

GDF declined to discuss the activists’ claims, saying in a written statement it would provide more transparency on its green bonds projects this quarter, and worked daily against climate change and to increase cleaner energy production.

There have been attempts to market certain bond sales as “green” despite questions about their environmental friendliness. A Canadian processor of tar sands, an energy source despised by environmentalists, wanted to sell debt as green bonds, as did a U.S. transport agency looking to build a superhighway, according to Sean Kidney of the Climate Bond Initiative, an organization that promotes environmental finance.

The road officials argued a new highway would ease traffic jams but made no account for increases in car usage new roads yield, said Kidney, who declined to identify the agency because the pitch was informal and abandoned.

Other spurned proposals included one to reduce energy use at a Latin American petrochemical plant and another in a multi-project deal for a hunting preserve.

A international collection of financial institutions, including BlackRock Inc and JPMorgan Chase & Co, belong to a group that have created the Green Bond Principles, which lay out voluntary guidance for the issuance of green bonds.

But the Green Bond Principles stop short of declaring industries or technologies such as nuclear power as ineligible, according to Ryan Brightwell of research group

TIAA-CREF has a $6 billion socially responsible portfolio. Some of its purchases include securities that are not labeled green but were within TIAA-CREF’s guidelines, according to Stephen Liberatore, lead portfolio manager for socially responsible fixed-income products at TIAA-CREF.

The company generally bypasses fracking and other investments centered on fossil fuels, Liberatore said, but counts among its green assets debt issued by a wind farm subsidiary of U.S. power group Exelon Corp.

“Our investors are looking to fund wind farms and those types of alternative energy projects,” Liberatore said. “Simultaneously our investors are hoping to engage with these corporations and get them to think about doing things differently going forward.”

Topics Pollution