Climate Bonds Initiative (CBI)

Information presented in this profile is for reference only. The Climate Action in Financial Institutions Initiative does not guarantee as to the exhaustiveness of this information and invites you to contact the Secretariat (contact@mainstreamingclimate.org) if you wish to propose any modifications.

By including this profile, the Initiative, its Supporting Institutions and the Secretariat do not endorse the activities described below nor the guidance and information provided in this profile.

Last updated: July 2018

Website: www.climatebonds.net/

Contact: www.climatebonds.net/contact

Summary: The Climate Bonds Initiative (CBI) is an investor-focused not-for-profit, launched to increase investments contributing to the transition to a low-carbon and climate resilient economy. It provides standards and guidance on green bonds and publishes studies on the evolutions of the green bonds market every year since 2012.

What are the objectives of the initiative?

“We promote investment in projects and assets necessary for a rapid transition to a low-carbon and climate resilient economy. The strategy is to develop a large and liquid Green and Climate Bonds Market that will help drive down the cost of capital for climate projects in developed and emerging markets; to grow aggregation mechanisms for fragmented sectors; and to support governments seeking to tap debt capital markets.”[1]

Who launched it? Who is participating?

CBI is an “investor-focused not-for-profit”[2]. Despite a focus on institutional and other investors, the Climate Bonds Partner Programme is also open to banks, non-governmental organizations, other stakeholders and government bodies, giving them access to the green bond issuance database.

An international Climate Bonds Standard Board comprised of large institutional investors and leading environmental NGOs provides ongoing oversight of the Certification Scheme as well as decisions on Certifications. Day-to-day operations and decision making is delegated to the Climate Bonds Standard Secretariat.

Why has this been put into place?

CBI is the only initiative “working solely on mobilising the $100 trillion bond market for climate change solutions”[3].

What are the main work streams/areas of work?

The CBI has three different work streams:

  1. Market tracking & Demonstration projects:
    Reporting on Climate Bond developments
    Sizing the Climate Bonds universe
  1. Developing trusted standards:
    Climate Bonds Taxonomy
  1. Providing policy models and advice:
    How to boost bank lending to renewables by adapting the $3 trillion covered bonds market to create renewable energy covered bonds.
    Delivering on the promise of large-scale energy efficiency (e.g. getting to 85% of housing stock within 10 years).
    Policy risk insurance for renewable energy bonds, to be provided by a consortium of governments.”

What are outcomes of the Initiative linked with the 5 Principles?

The CBI is at the origin of the Climate Bonds Standard & Certification Scheme and the Climate Bonds Taxonomy, which to date is often regarded as one of principal references on the topic internationally:

“The Climate Bonds Standard and Certification Scheme is a Fair-trade-like labelling scheme for bonds. Rigorous scientific criteria ensure that it is consistent with the 2 degrees Celsius warming limit in the Paris Agreement. The Scheme is used globally by bond issuers, governments, investors and the financial markets to prioritise investments which genuinely contribute to addressing climate change.”[4]

“The Climate Bonds Standard is an environmental standard. It is not a substitute for financial due diligence. It is an authoritative standard that eases decision-making and focuses attention on credible climate change solutions in the debt capital markets.”[5]

“The Climate Bond Certified Mark (“Certification Mark”) is registered in multiple countries and is used to designate Certified Climate Bonds.”[6]

The Climate Bonds Taxonomy “provides broad guidance for prospective green bond and climate bond issuers and investors”[7]:

 Source: CBI 2018

 

Have intermediate or final reports / guidance been issued?

  • Post Issuance Reporting in the Green Bond Market-Trends & Best Practice (2017) – “This is Climate Bonds Initiative’s first study on post-issuance reporting of green bonds. The aim is to follow up on post-issuance reporting by green bond issuers to see how thoroughly they are reporting on green bond allocation and projects.”
  • Climate Bonds Standard, version 2.1 (2017) – “The Climate Bonds Standard sets out clear criteria to verify certain green credentials of a bond or other debt instrument. It aims to provide a robust approach to verifying that the funds are being used to finance projects and assets that are consistent with delivering a low carbon and climate resilient economy.”
  • As of May 2018 CBI publications mainly focus on the state of the green bond market and public sector guidance. Examples include:
    • Green Bond Highlights 2017
    • Public sector agenda for stimulating private market development in green securitisation in Europe (2017) – “Scaling up investment in low-carbon infrastructure is of paramount importance for limiting global warming to 2°C and for the EU to meet its 2030 emissions targets. The annual global investment required for infrastructure in a low-carbon scenario amounts to trillions of euros; this is not being met. This paper examines the role that green securitization could play in plugging this gap.”
    • Sovereign Green Bonds (2018) – “This Briefing is the latest in a new series of Climate Bonds publications analyzing contemporary developments in the green bond market. The focus is on sovereigns, new issuers in the green bond space, and their key role in growing local markets and meeting national climate targets.”
  • CBI also publishes background information and knowledge-sharing webinars:
    • Background information on “understanding bonds” and “useful information about green and climate bonds”
    • Webinars:
      • Green bond pricing in the primary market 2017
      • Road component of the Climate Bonds Low Carbon Transport Criteria
      • Rail component of the Climate Bonds Low Carbon Transport Criteria
      • Climate Bonds Wind Criteria
      • Climate Bonds Solar Criteria
      • Climate Bonds Water Criteria
      • What is ‘Green’ in a Bond, Why Labels Count, the Growing Role of Standards
      • Introduction to Green Bonds: Everything you wanted to know but were afraid to ask!

Calendar and milestones

  1. https://www.ifc.org/wps/wcm/connect/99854086-d728-42ba-a969-53d2fb889b89/EMCompass+Note+25+Green+Bonds+FINAL+12-5.pdf?MOD=AJPERES
  2. https://www.climatebonds.net/standards/standard_download

Associated Supporting institutions of the Climate Action in Financial Institutions Initiative:

  • HSBC funds the State of the Market report and research.

[1] https://www.climatebonds.net/about

[2] https://www.climatebonds.net/about

[3] https://www.climatebonds.net/

[4] https://www.climatebonds.net/standards/taxonomy

[5] https://www.climatebonds.net/standards/faqs

[6] https://www.climatebonds.net/files/files/Climate%20Bonds%20Standard%20v2_1%20-%20January_2017.pdf

[7] https://www.climatebonds.net/standards/taxonomy

Links with the 5 Voluntary Principles for Mainstreaming Climate Action

This section aims to support discussions on the implementation of the 5 voluntary Principles for Mainstreaming Climate Action. Information provided in this section is for reference only; the Climate Action in Financial Institutions Initiative, its Supporting Institutions and the Secretariat do not endorse the activities nor the guidance and information provided in this section.

The CBI publishes guidance on reporting for green bond issuers:

Climate Bonds Standard, version 2.1, 2017

“Reporting Prior to Issuance

  1. The Issuer shall disclose in the Bond Disclosure Documentation:
    1. The invest areas, as provided in Clause 9.1*, into which the Nominated Projects & Assets fall.
    2. The intended types of temporary investment instruments for the management of unallocated proceeds in accordance with Clause 2.1.2.
    3. The Verifier selected by the Issuer for the pre-issuance and the post-issuance engagements.
    4. Whether periodic Assurance Engagements will be undertaken during the term of the bond to reaffirm conformance with the Climate Bonds Standard, and the expected frequency of any periodic Assurance Engagements.”

“Reporting

8.1. The Issuer shall provide to bond holders and to the Climate Bonds Standard Secretariat at least annually a report containing the list of Nominated Projects & Assets to which proceeds of the bond have been allocated (or re-allocated). The report shall include a brief description of the projects and the amounts disbursed, as well as the expected impact of the Nominated Projects & Assets.

8.1.1. The Issuer shall use qualitative performance indicators and, where feasible, quantitative performance measures of the impact of the Nominated Projects & Assets;

8.1.2. The Issuer shall disclose the methods and the key underlying assumptions used in preparation of the performance indicators and metrics;

8.1.3. Where confidentiality agreements, competitive considerations or a large number of underlying assets limit the amount of detail that can be made available about specific Nomitaed Projects & Assets, information shall be presented on the investment areas which the Nominated Projects & Assets fall into, as provided in Clause 9.1.*”

*”Clause 9 refers to the Climate Bonds Taxonomy”

Post Issuance Reporting in the Green Bond Market-Trends & Best Practice, 2017:

Based on different existing guidelines (Green Bond Principles, The Climate Bonds Standard, People’s Bank of China, Securities Exchange Board of India, and Ministry of Environment of Japan), the Climate Bonds Initiative makes recommendations for post-issuance reporting, which should:

  • “take place at least annually”
  • “[be] up to date”
  • “[be] public and easy to find”
  • “include a list of bonds issued to date with the amount (or percentage) that has been allocated to date from each bond”
  • “include information (graphical if possible) on the percentage of proceeds that have been allocated to different project types”
  • “where possible […] provide project-level information as well as the amount allocated to each project”
  • “provide information about what proportion of funds has been used to refinance existing projects”.