Why? Many financial institutions are developing and using a variety of targeted financial instruments to finance climate-related activities and investments to seek out new investment opportunities.
How? While “green bonds” are the climate-related products the most well-known, institutions have also developed climate-related loans or intermediated debt financing products. These products typically use climate-related eligibility criteria. This in turn implies that institutions assess investments against these criteria – as well as develop a system for ex-ante assessment, monitoring, reporting and verifying to ensure that criteria are met. Additionally, institutions may use a robust external auditing of climate-related criteria, such as via second party opinions.