Certification

The Climate Bonds Standard and Certification Scheme is a labelling scheme for bonds, loans & other debt instruments. Rigorous scientific criteria ensure that it is consistent with the goals of the Paris Climate Agreement to limit warming to under 2 degrees. The Scheme is used globally by bond issuers, governments, investors and the financial markets to prioritise investments which genuinely contribute to addressing climate change.

 

Eligible Debt Instruments

The list of Eligible Debt Instruments which can be Certifed under Climate Bonds Standard Version 3.0 can also be found in Annex 1 of the V3.0 document.

 

Debt Instrument

Definition Examples & Comments 

 

 

Use of Proceeds Bond         

 

 

 

 

A standard recourse-to-the-issuer debt obligation for which the proceeds shall be credited to a sub-account, moved to a sub-portfolio or otherwise tracked by the issuer and attested to by a formal internal process that will be linked to the issuer’s lending and investment operations for Eligible Projects & Assets.

 

 

 

 

Certified Climate Bonds: NAB, ANZ, ABN AMRO, Axis Bank, Westpac, Deutsche Kredit Bank, Treasury Corporation Victoria, NTPC

 

 

 

Revenue Bond     

 

 

A non-recourse debt obligation in which the credit exposure in the bond is to the pledged cash flows of the revenue streams, fees, taxes etc., and the use of proceeds of the bond goes to related or unrelated Eligible Projects & Assets.

 

 

Certified Climate Bonds: New York MTA, San Francisco PUC

 

 

Project
Bond          

 

 

A project bond for a single or multiple Eligible Projects & Assets for which the investor has direct exposure to the risk of the project(s) with or without potential recourse to the issuer.

 

 

Certified Climate Bonds: AP Renewables, Inc (with ADB), ReNew Power

 

 

Securitisation
(ABS) Bond      

 

 

A bond collateralized by one or more specific Eligible Projects & Assets, including Asset Backed Securities (“ABS”), Mortgage Backed Securities (“MBS”), and other securitisation structures. The only source of repayment is the cash flows of the assets.

 

 

Certified Climate Bonds: Flexigroup, Obvion

 

Convertible Bond or Notes        

 

Bonds or notes which have the right but not the obligation to convert into a specified number of ordinary shares (or other securities) under specified terms and conditions. 

 

If the bond was Certified at issue but later converted to equity, then its status as a Certified Climate Bond would end at the point of conversion.

 

Covered Bond
or Pfandbrief       

 

A dual recourse bond which relies primarily on repayment from the issuer, but also has access to a pool of assets (the cover pool). The cover pool often comprises mortgages, but Other assets can be used as collateral too. For instance the German Pfandbrief market includes Mortgage Pfandbrief, Public Pfandbrief, Ship and Aircraft Pfandfbrief. Luxembourg has proposed a law on renewable infrastructure covered bonds.

 

 

Sukuk

 

“Sukuk” is a term referring to various types of quasi-debt securities that have been developed to meet the strictures of Islamic finance. One of the core principals underlying Islamic finance is avoiding the payment or collecting of interest. A variety of financial instruments have been created that serve the same purpose as bonds and other debt securities, but on which interest technically is not paid. 

 

 

 

Schuldschein A traditional German floating or fixed debt instrument with a typical maturity of two to 10 years and a typical volume of EUR10 to 500m. Legally speaking, a Schuldschein is a certificate of indebtedness evidencing a loan. Some features of a Schuldschein are similar to those of loans, others are more similar to bonds. 

Certified Climate Bonds: Nordex

 

Commercial
Paper       

 

 

Short-term debt securities. Unsecured promissory notes issued by strong credits including both financial institutions and non-bank corporates, generally with maturity of 270 days or less. 'Short-term' in this context means that it has a term of less than 365 days where issued in the UK. Different rules apply in the US market.

 

 

Certified Climate Bonds: Contact Energy

 

 

 Loan
Facility        

 

 

A credit line made available to borrowers to finance projects or for other purposes.  Loans can be secured and unsecured. Typical examples of secured loans are project finance facilities and mortgages.

Loan types include bilateral facilities between a borrower or borrower group and single lender); syndicated facilities between a borrower/borrower group and a club or syndicate of lenders, which may include non-bank lenders such a insurance companies, debt funds, hedge funds and private equity investors; structured finance, which includes loan tranches with different risk and pricing charactrestics; facilities designed for a specific function such as export credit facility, credit line, etc.

A loan facility can use a set of screens or criteria to identify which underlying assets can be financed via the facility. Screens could include underlying assets must meet the sector-specific criteria of the Climate Bonds Standard. 

The Loan Market Association published the Green Loan Principles in March 2018 which provide similar guidance for green loans as the ICMA Green Bond Principles provide for green bonds.

 

 

Loans Certified under the Climate Bonds Standard: MEP Werke, Quadran Energies Libres, Ivanhoe Cambridge and Natixis Assurances (DUO), OVG

Bilateral Loan
 

A loan agreement between one lender and the borrower(s)

 

 

Syndicated /Club Loan:

 

A loan from a number of different lenders acting together. The lenders form a syndicate and the borrower borrows from the syndicate. Common types of syndicated loans are underwritten deals, best-effort deals and club deals. Usually structured by one of several commercial banks or investment
banks, can also include ‘non-bank’ lenders such as debt funds, insurance companies, hedge funds or pension funds.

 Geysers Power
Revolving Credit Facilities, Export Credit Facilities

 

and similar credit lines with a term of exceeding one year, where the parties to the loan must agree how the flow of funds will be evidenced.

 

 

 

Commercial Paper Short-term debt securities. Unsecured promissory notes issued by
strong credits including both financial institutions and non-bank corporates.
 
Debt Instruments issued by a Green Bond Fund Green Bond Fund is a fund which invests in green bonds based on a set of screens or criteria. Screens for the fund could include that the underlying projects and  assets must meet the relevant Sector Eligibility Criteria of the Climate Bonds Standard. The fund is likely to issue securities such as units in a trust or use similarly structured arrangements to raise equity. Certification is only available for the debt instruments issued by the fund. The fund itself is not eligible for Certification under the Climate Bonds Standard.  
Green Deposits: client funds held by a financial institution which are clearly identified and allocated to a portfolio of projects and assets which meet the relevant Sector Criteria of the Climate Bonds Standard.  

 

CONTACT

If you are interested in Basic Certification or Programmatic Certification of a type of bond which is not covered by the definitions above please contact directly: 

Matteo Bigoni

Head of Certification

Climate Bonds Initiative 

 

matteo.bigoni@climatebonds.net

certification@climatebonds.net