Climate Bonds' Equivalence Methodology for Climate Mitigation

Why is the Climate Bonds Standard evolving 

Since 2012, Climate Bonds Initiative (Climate Bonds) has maintained a robust, science‑based Taxonomy and Certification Scheme that has been supporting the growth of labelled bond markets worldwide.  With the development of more than 50 global taxonomies, the sustainable finance definitions ecosystem has become not only more sophisticated but also considerably more fragmented.  In this environment, it is evident that cross‑border capital flows require stronger alignment between systems. 

In order to mobilise capital at the scale required to meet climate goals, taxonomies need to work together, based on shared scientific principles, while still reflecting local contexts, data availability and policy priorities. Climate Bonds sees interoperability as essential to maintaining credibility, usability and scalability in sustainable finance. 

What does the change from CBSv4.3 to CBSv4.4 involve 

Historically, the Climate Bonds Standard has relied predominantly on criteria developed internally through expert Technical Working Groups. This update to the Climate Bonds Standard reflects a strategic evolution towards integrating credible externally developed criteria that meet Climate Bonds’ scientific and governance standards. This will enable a more rapid expansion of sectoral coverage and the incorporation of localised criteria alongside global, while avoiding duplication, and maximising interoperability of rigorous technical work globally. It is intended to improve usability and consistency for market participants, while retaining ambition and integrity, and ensures Climate Bonds remains a trusted, science‑based reference point in a crowded and evolving landscape. 

Using the draft Climate Bonds Equivalence Methodology for Climate Mitigation (the Equivalence Methodology) as its guiding framework, which is open for consultation, Climate Bonds has undertaken a review of the Australian Sustainable Finance Taxonomy as a pilot initiative.  The results of this   will allow the Climate Bonds Certification Scheme to expand the range of eligible sectors, activities and measures, while supporting greater coherence for Australian and global issuers. 

What is the Climate Bonds Equivalence Methodology for Climate Mitigation? 

 The Equivalence Methodology sets out a transparent approach and set of principles for assessing when externally developed mitigation criteria can be recognised for inclusion in the Climate Bonds Taxonomy and, in conjunction with the CBSv4.4, used as a basis for Certification under the Climate Bonds Standard and Certification Scheme. 

External criteria are deemed equivalent where they are developed in line with the same scientific, technical and governance principles applied by Climate Bonds. 

Importantly, equivalence is assessed at the level of individual criteria, not entire taxonomies. Climate Bonds does not certify or endorse external taxonomies in their entirety. 

Governance and safeguards 

Strong governance underpins the Equivalence Methodology to cover how external criteria are developed (including consultation, independence and transparency) as well as a process of validating their equivalence. 

Additional oversight and public consultation apply where criteria introduce new sectors or have global applicability. 

While the methodology focuses on substantial contribution to climate mitigation, Climate Bonds continues to apply appropriate safeguards and Do No Significant Harm considerations within its certification processes. 

Public Consultation 

Climate Bonds is inviting feedback from stakeholders across finance, policy and industry on the proposed Standard v4.4, the draft Climate Bonds Equivalence Methodology for Climate Mitigation as well as its application on the Australian Taxonomy criteria.  

Consultation inputs will help ensure the framework delivers both scientific integrity and practical usability across markets. Feedback from this consultation will inform the final design of the updated Standard and the Equivalence Methodology to ensure is fit for purpose, globally applicable, and able to support credible, transparent, and scalable climate-aligned investment. 

1. What is changing in Climate Bonds Standard v4.4? 

Climate Bonds is proposing to expand Certification eligibility by recognising equivalent criteria from credible external taxonomies, alongside existing Climate Bonds Sector Criteria. This is being consulted on as part of the Climate Bonds Standard v4.4 update.

2. What is the Climate Bonds Equivalence Methodology for Climate Mitigation? 

The Equivalence Methodology is a structured framework used to assess whether externally developed mitigation criteria are sufficiently scientific, ambitious and credible to be incorporated into the Climate Bonds Certification Scheme. The Methodology provides a robust and transparent way to assess external criteria while maintaining Climate Bonds’ scientific integrity. A separate methodology will be developed for climate resilience investment criteria in due course.  

3. Does this upgrade introduce a new Certification label? 

No. Climate Bonds Certification remains a single, trusted label. External criteria may be recognised as equivalent and used within Climate Bonds Certification, but this does not create a new certification category. 

4. How does Climate Bonds determine whether external criteria are equivalent? 

External criteria are deemed equivalent where they comply with the equivalence principles outlined in the Equivalence Methodology, including scientific grounding, alignment with 1.5 °C or well below 2°C trajectories, avoidance of fossil-fuel lock-in, and transparent governance.   

Each activity or measure is assessed individually rather than at taxonomy level.

5. What principles underpin the assessment of equivalence? 

For mitigation activities, Climate Bonds applies seven core principles for assessing equivalence with Climate Bonds principles, where relevant: 

• Consistency with ambitious temperature goals 
• Scientific basis 
• Sector specificity 
• Comprehensive emissions coverage 
• Emissions coverage over time 
• No reliance on offsets 
• Metrics integrity

6. How are “measures” (such as technologies or practices) assessed? 

Measures must meet the following principles to ensure that recognised measures support transformational change rather than incremental improvements: 

1. Represent a significant decarbonisation step or are an essential no‑regrets enabling action 
2. Do not lead to fossil fuel lock-in  
3. Do not obstruct electrification or long‑term decarbonisation pathways 

7. Will equivalent criteria be used globally or only locally? 

That depends on how the criteria were developed: 

• Globally applicable criteria (e.g. based on global models or data) may be adopted for global use. 
• Locally contextualised criteria may be adopted for use only in the jurisdiction or region for which they were designed 

8. Why was the Australian Sustainable Finance Taxonomy chosen as the first pilot? 

Climate Bonds has been closely involved in the development of the Australian Taxonomy and as a result there is a strong convergence between Australian Taxonomy criteria and Climate Bonds Criteria across several sectors, including renewable energy, buildings, transport and manufacturing. The Australian Taxonomy pilot will also allow new sectors, such as mining and critical minerals, to be considered through the equivalence approach, subject to a public consultation process, as required by the Equivalence Methodology.  

9. What is the External Taxonomy Equivalence Register (ETER) 

The ETER is currently in the form of an excel spreadsheet and presents the results of screening activities and measures in an external taxonomy using the Equivalence Methodology.  

It is essentially a list of activities and measures from an external taxonomy that have been screened for equivalence based on the Equivalence Methodology.

10. How can stakeholders participate in the consultation? 

Climate Bonds is inviting feedback from stakeholders across finance, policy and industry on the proposed Standard v4.4 updates, the Equivalence Methodology and the ETER Consultation inputs will help ensure the framework delivers both scientific integrity and practical usability across markets. 

Participants in the consultation will need to complete the consultation questionnaire.

11. How are DNSH requirements treated in the equivalence assessment 

Where the criteria for equivalent activities are used in Climate Bonds Certification, such activities must also demonstrate compliance with the external taxonomy’s generic or cross-cutting Adaptation & Resilience requirements. 

Where Climate Bonds DNSH requirements for any sector extend beyond Adaptation & Resilience, the assessment must be enhanced through application of the corresponding DNSH requirements within the external taxonomy for those environmental objectives.