Climate Bond Standard released, open for business; Goal to Assure Integrity of Green Claims for Investors, Governments
The Standard is a screening tool for investors and governments to support investment in delivering a Low Carbon Economy. Bonds complying with the Standard will be certified as ‘Climate Bonds’— a mark that assures their contribution to the delivery of a Low Carbon Economy.
Jack Ehnes, CEO of Standards Board member CalSTRS, said, “We are looking for investment-grade returns that also address climate change. The Climate Bond Standard will allow us to know that investment opportunities put before us will be the right ones to build a Low Carbon Economy.”
The finalized text was approved by the Climate Bond Standards Board, a group of institutional investors and leading environmental NGOs consisting of the California State Teachers’ Retirement System(CalSTRS); the Natural Resources Defense Council; the California State Treasurers’ Office; the Investor Group on Climate Change (IGCC); the Carbon Disclosure Project; and the Ceres Investor Network on Climate Risk (INCR).
Sean Kidney, Chair of the Climate Bonds Initiative welcomed the release saying, “This product allows for a new fixed income asset class to emerge and grow - one that will be focused on recognizing the investments needed to deliver a Low Carbon Economy by 2050 and on limiting the risk of dangerous climate change.”
The release concludes a 6-month development phase including a public consultation period and input from industry experts such as the International Finance Corporation (IFC), Standard & Poor’s, Aviva Investors and KPMG.
In its first iteration, the released version lists wind energy investments currently eligible with an expansion to solar energy and other renewable energy investments to follow in the coming months.
As well as types of investments that are eligible, the Standard will address traceability of funds and types of bonds than can be certified. Eligibility criteria for different types of investment will be released progressively over the coming year.
According to the International Energy Agency, approximately $1 trillion a year is required out to 2050 in mitigation and adaptation investments. Funds under management by global bond traders reached $95 trillion in 2010 and more than $6 trillion of new bonds were issued.
Some $12 billion of bonds backed by investments related to climate change solutions have already been issued internationally according to the Climate Bonds Initiative Issuance List. Growing this “green debt” market will provide institutional investors with opportunities to switch from carbon intensive to low-carbon investments – and fuel the growth of the low-carbon economy.
Nathan Fabian from the Investor Group on Climate Change, pointed to the need for more investment opportunities: “We challenge industry and government to now provide the investment opportunities we need to both deliver secure pensions for our members and address the long-term systemic threat of climate change.” The Investor Group on Climate Change is a Climate Bond Standards Board member.
About Climate Bonds Initiative:
The Climate Bonds Initiative is an investor-focused not-for-profit, promoting large-scale investment in the low-carbon economy. The Climate Bonds Initiative is developing:
- Proposals for governance architecture — regulatory mechanisms, standards, tax policies, green banks — that will support a rapid scaling up of investment.
- Models for engineering investibility in projects and assets necessary for attracting bond financing such as renewable energy, energy efficiency and forestry.
A launch event is being held in London at 4pm GMT today 24 Nov 2011.
Star speakers are UK Minister for Climate Change, Greg Barker, James Cameron from Climate Change Capital, Christian Kjaer from the European Wind Energy Association, Steve Lambert from National Australia Bank, Nick Robins from HSBC, and Sean Kidney from Climate Bonds.
If you'd like to listen in to the speeches via teleconference, simply email marleen.franke(at)climatebonds.net for details.
“The Climate Bond Initiative is an important project that could help spur the development of green bond markets suitable for institutional investors.
“Efforts to develop scientifically credible, evidence-based standards for what types of projects and technologies are eligible for green bond certification will be an important factor supporting the integrity of these markets. We will closely follow the development of this and other similar projects aiming to address climate change financing, and assess possible investment opportunities that fit with the investment strategy for the Government Pension Fund Global.”
“Despite current circumstances, governments and investors around the world have a prime opportunity to transition to a sustainable, low-carbon economic growth path with the investment and employment benefits that entails. Climate Bond Standards offer a ready-made tool to assist this transition, in California and around the world. We look forward to working with other partners to set practical, integral standards for Climate Bonds.”
“The transition to a low-carbon economy requires a huge range of energy and infrastructure investments. We are concerned that the investments being made are the right ones.
“Climate Bonds Standards will provide a simple tool for investors to screen the opportunitiesthat come before them. Our engagement with the Climate Bond Standards Board is about the investment community taking the lead in identifying appropriate investments.”
“Governments should also support the setting up of a ‘rating agency’ or standard setter to rate and/or certify green projects (such as green bonds or green funds).
“A simple step would be for the OECD member countries to participate in and support investor-driven ratings initiatives such as the Climate Bonds Standards Scheme.
“Governments could also use the eligibility criteria of such schemes as a base reference for preferencing policies around fixed income investments. This would ensure consistency of labelling with international debt issuance: for smaller countries in particular this will support access to internationally focused institutional investors.”
From Della Croce, Kaminker and Stewart (2011), “The Role of Pension Funds in Financing Green Growth Initiatives”, OECD Publishing, Paris.
“Bond finance built America’s highways, Europe’s drains and funded the Allies through two World Wars. Perhaps now we can raise Climate Bonds to deliver the quick, global transition required to head off runaway climate change.”
“The Climate Bonds Initiative provides a welcome platform to investigate the policy and market framework that will simultaneously raise capital for low carbon solutions and provide attractive risk adjusted returns for investors.”