A major step forward for financial markets as new Certification Scheme launched for Entities, Assets and Sustainability-Linked Debt

A major step forward for financial markets as new Certification Scheme launched for Entities, Assets and Sustainability-Linked Debt

 

Climate Bonds’ long-awaited standards assess 1.5-degree aligned pathways of future performance targets, credible transition plans and avoid greenwashing in SLBs

 

LONDON, 13/04/2023, 09:00 GMT+1: Releasing today, a major expansion to the Climate Bonds Standard and Certification Scheme will offer Company-level Certification, signalling to investors that the corporate is a green entity on a Paris-aligned pathway of 1.5-degrees.

The Certification focuses on key aspects needed to demonstrate a credible transition for debt instruments such as SLBs and go beyond to deeper company-level assessments to provide assurance on climate credentials of the corporate entity, extending certification to not just their labelled debt but to the wider general-purpose debt and equity investment.

Certification under the Climate Bonds Standard is designed to provide granular simplicity and bridge the market gap in existing guidance on transition financing. It supports all transition, provided the goals, the path and the pace are suitably ambitious. Thereby:

  • Corporates and SLBs from all sectors will be eligible for certification (once relevant sector-specific criteria are available).
  • Corporates and SLBs from those already on 1.5-degree pathways are eligible for certification as are those who will align with those pathways by 2030 at the latest (so long as they can demonstrate the ambition of their future Performance Targets and the credibility of their Transition Plans to deliver on those Targets). 

Sean Kidney, CEO, Climate Bonds Initiative:

“Sustainability-linked bonds offer investors influence over climate impact at the company level; This has been a ground-breaking evolution in environmental finance leaving investors scrambling to part with their capital.”

“Corporate entity certification will unleash the force of climate finance beyond bond markets towards equities. This is a huge win for the climate and huge evolution for financial markets, the future of which is sure to rely on credible knowledge on companies’ climate impact.”

 

New Investment Labels for Market

Level 1 – 1.5 -degree Aligned

Entities, Debt Instruments or Assets that are already aligned with 1.5-degree pathways. This category includes both those already near net-zero and those above net-zero but within sectoral 1.5-degree pathways and transition plans that predict alignment with those pathways going forward.

Level 2- Transitioning to 1.5-degree

Entities or Sustainability-linked debt whose transition plans predict that they will be aligned with 1.5-degree pathways by 2030.

 

See the List of sectors that are covered under the new scheme below in Figure 1.

The Climate Bonds Initiative (Climate Bonds) continues to support and expand guidance for sustainable finance markets, from the established debt instruments to the relatively new financial instruments like Sustainability-Linked Bonds (SLBs). Climate Bonds mission is to mobilise debt capital markets by providing products and services that define credible investment and avoid greenwashing.

To be credible, transition plans must exhibit ambition by defining pathways compatible with a future of no more than 1.5-degree global warming. Achieving 1.5-degree future will not only require building up low or zero carbon industry but must initiate an inclusive movement by decarbonising the highest emitters.

 

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Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference to a financial organisation or debt instrument or investment product is for information purposes only. Links to external websites are for information purposes only. The Climate Bonds Initiative accepts no responsibility for content on external websites.

The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within this communication should be taken as such, nor should any information in this communication be relied upon in making any investment decision.

Certification under the Climate Bond Standard only reflects the climate attributes of the use of proceeds of a designated debt instrument. It does not reflect the credit worthiness of the designated debt instrument, nor its compliance with national or international laws.
A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind, for any investment an individual or organisation makes, nor for any investment made by third parties on behalf of an individual or organisation, based in whole or in part on any information contained within this, or any other Climate Bonds Initiative public communication.