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The Climate Bonds Initiative is an investor-focused not-for-profit working to mobilize bond markets for climate change solutions. Climate change solutions involve a rapid transition to a low-carbon and climate resilient economy.
We aim to reduce the cost of capital for climate related investments, while at the same time seeing the creation of safe and secure investments suitable to the needs of pension and insurance funds.
The current value of the bond markets is estimated (by the Bank of International Settlements) to be worth $78 trillion at the end of December 2012 . Our goal: $1 trillion of investment flowing each year to low-carbon industries.
A fresh initiative
The Climate Bonds Initiative is:
1. Providing policy models and advice
Rapid change at very large scale will depend on a close working relationship between government, finance and industry. The Climate Bonds Initiative is developing policy proposals for all three sectors, including:
- 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.
2. Developing trusted standards
The Climate Bond Standards Board is developing standards for investments eligible to be called Climate Bonds.
This will provide greater certainty for investors about the climate benefit of their investments, especially in controversial areas like energy efficiency and bio-energy.
Board members are California State Teachers’ Retirement System (CalSTRS), the State Treasurer of California, the (US) Investor Network on Climate Risk, the Natural Resources Defense Council, the Carbon Disclosure Project, and the (Australian) Investor Group on Climate Change.
An Industry Working Group consults with the Climate Bond Standards Board. Members include representatives from: Standard & Poor’s, Aviva Investors, the IFC (a part of the World Bank Group), KPMG, PricewaterhouseCoopers, DNV and Calvert Funds Management.
The Board has already created standards for wind energy bonds and has certified its first bond, soon to be launched. Solar and energy efficiency investments will be the next to be certified.
3. Launching demonstration projects
The aim of these ‘proof-of-concept’ projects is to demonstrate investibility and the potential to finance with Climate Bonds.
For example, working with municipalities in England, the Climate Bonds Initiative is developing a plan for securitization of residential energy efficiency loans with the aim of providing a financing pipeline for the whole country.
The Climate Bonds Initiative is a special project of:
- The Carbon Disclosure Project, an independent not-for-profit organisation that collects and distributes high quality corporate climate change information for integration into business and policy decision-making, and
- The Network for Sustainable Financial Markets, an international network of finance sector professionals, academics and others dedicated to improving financial market integrity and efficiency.
Pro bono legal advisors: Shearman Sterling LLP
 Prior to December 2012 the BIS had said the bond market was worth $100 trillion. However, in Dec 2012 they published a paper saying they’d uncovered problems in their methodology that had ed to double-counting, and revised the global figure down some $20 trillion!