Chartered Financial Analyst Level 2

Explanation

Correct Answer: A (Bond issuers)

Key Points:

• Bond issuers have the primary decision-making authority for labeling a security as a green bond
• Green bonds are debt instruments where the proceeds are exclusively applied to finance or refinance new and/or existing eligible green projects
• The issuer makes the determination about whether to label a bond as "green" based on their intended use of proceeds

Why Other Options Are Incorrect:

• Credit rating agencies (B): While they may provide second-party opinions on green bond frameworks, they don't have primary decision authority
• Self-regulatory organizations (C): These organizations may establish standards or guidelines, but the labeling decision ultimately rests with the issuer

Additional Context:

Green bond labeling typically involves:

1. Issuer commitment to use proceeds for environmentally beneficial projects
2. Alignment with recognized standards (like Green Bond Principles)
3. External verification (optional but common)
4. Ongoing reporting on use of proceeds

The issuer's decision is fundamental as they are responsible for the bond's environmental claims and use of proceeds.