Confidence in the green credentials of green bonds is essential to a sustainable market.
Transparency to the underlying asset is important in allowing investor due diligence. Credible, science-based, widely-supported guidelines about what should and should not be considered a qualifying investment helps investors make informed decisions about the environmental credentials of a bond.
The Climate Bonds Standard provides clear, sector-specific eligibility criteria for assets and projects that can be used for Climate Bonds and Green Bonds.
Certification is available for assets and projects that meet the requirements of the Climate Bonds Standard.
In order to receive the “Climate Bonds Certified” stamp of approval, a prospective issuer of a Green or Climate Bond must appoint an 3rd party Approved Verifier, who will provide a verification statement that the bond meets the Climate Bonds Standard.
The Climate Bonds Standard allows Certification of a bond prior to its issuance, enabling the issuer to use the Climate Bonds Certification Mark in marketing efforts and investor roadshows. The Climate Bonds Standard Board (comprised of members representing $34 trillion of assets under management) confirms Climate Bonds Certification once the bond has issued and the proceeds have been allocated to the projects and assets.
Introduction to Certification
Bonds which are verified to conform with the Climate Bonds Standard are called Climate Bonds Certified Bonds. The Standard contains rigorous scientific criteria which are consistent with the 2 degrees Celsius warming limit declared in the 2015 Paris Agreement.
In order to receive the Certified Climate Bonds stamp of approval a prospective issuer must appoint an Approved Verifier, who will supply an assurance report to say that the bond meets the Climate Bonds Standard’s requirements. The Climate Bonds Standard Board provides the final confirmation of all Climate Bond Certifications.
The Climate Bond Standard allows Certification of a bond prior to its issuance, enabling the issuer to use the Climate Bond Certification Mark in the bond marketing efforts and investor roadshows. After the bond has been issued and allocation of the bond proceeds has begun, the issuer must confirm the Certification by obtaining another assurance (the "post issuance") report and providing that to the Climate Bonds Standard Board.
What sectors are available for Certification
Bonds are verified according to the type of physical assets or infrastructure which they fund. The most up to date list of sectors which may be involved in a Certified Bond may be found here in the Sector Criteria page.
Please contact Matteo Bigoni, Head of Certifications, at firstname.lastname@example.org for further information.
Benefits of Certification
1) More diverse investor base: certification signals the low-carbon integrity of the bond and is important for investors looking for climate related investments. Most issuers of Certified Climate Bonds find that the range of investors interested in their bond is much broader.
2) Easier-to-find: ceritification allows potential investors to quickly find a credible green / climate bond on Bloomberg and via other providers of market information.
3) Enhanced reputation: certification allows an issuer to associate its organisation with efforts to scale up financial flows for delivering the low-carbon economy and securing prosperity for future generations.
4) Lower cost: issuers pay less for certification than for a second opinion, and investors avoid the cost of environmental due diligence.
What is innovative about the standard is that it allows not only obvious project bonds for renewable energy generation or green portfolio bonds to be labelled as ‘climate bonds’, but it also allows corporate bonds to be linked with low-carbon activities, without compromising on the normal credit ratings of the issuer.
A robust and credible standard eases decision-making and focuses attention on credible climate change solution opportunities. The easier it is to use the faster the market will grow.
Investors can use the Climate Bond Standard as a screening tool to assure the low-carbon nature and integrity of their fixed-income investments.
While certification as conforming with the Climate Bond Standard does not provide any assurance regarding credit risks or returns, it does allow investors to save time and money in analysing low-carbon credentials of investments across sectors and asset classes.
A liquid market of certified Climate Bonds also allows investors to actively participate in the delivery of the Low-Carbon Economy in three key ways:
1) Proactively hedge against future climate risks by financing a low-carbon transition
2) Signal to the market their appetite for suitably risk-adjusted green deal-flow; and
3) Signal to governments their willingness to invest in the low-carbon transition subject to stable policy frameworks and risk-adjusted returns.
Who can issue Climate Bonds?
Climate Bonds can be issued by a variety of different organisations seeking to finance or re-finance low-carbon developments. The focus for Climate Bond Certification is the portfolio or Low Carbon projects & assets being financed by the Climate Bond, rather than the entity which is issuing it, such as:
- Project developers
- Equipment manufacturers
- Local Governments
- State backed entities
- National Governments (sovereign)
If you are interested in having a bond certified as a Climate Bond or would like more detail on the steps involved, please contact directly:
Head of Certification
Disclaimer: "The Climate Bonds Standard Board operates legally as an advisory committee of the Climate Bonds Initiative Board and oversees the development of the Climate Bonds Standard. Neither the Climate Bonds Standard Board nor any organisation, individual or other person forming part of, or representing, the Climate Bonds Standard Board (together, "CBSB") accepts or owes any duty, liability or responsibility of any kind whatsoever to any issuer which wishes to apply for any of its bonds to be certified under the Climate Bonds Certification Scheme ("Scheme"), or to any issuer whose bonds may at any time be certified under the Scheme or to any other person or body whatsoever, whether with respect to the award or withdrawal of any certification under the Scheme or otherwise. All advice or recommendations with respect to any certification under the Scheme or otherwise that CBSB provides to the Climate Bonds Initiative Board is provided to it in an advisory capacity only and is not to be treated as provided or offered to any other person”