Standard

The Climate Bonds Standard and Certification Scheme is a labelling scheme for Entities, Assets and Debt Instruments. Rigorous scientific criteria ensure that Certified investments in climate mitigation are consistent with the 1.5owarming limit in the Paris Agreement. The Scheme is used globally by bond issuers, governments, investors and the financial markets to prioritise investments which genuinely contribute to addressing climate change.

Climate Bonds Standard V4.1

 

Expanding the R&D Definition and including a 5% Flexibility Pocket

R&D Definition Enhanced for Greater Impact:

The updated CBS v4.1 now includes a more inclusive definition of R&D, recognising the critical role of scientific research and emerging technologies in achieving a net-zero transition. This revision allows for the inclusion of earlier-stage R&D investments which have been demonstrated to contribute to substantial GHG emission reduction, removal or avoidance. This ensures that funds channelled towards innovative climate solutions are consistent with the broader goals of climate change mitigation.

In a strategic move to support new technologies in sectors not yet covered by Climate Bonds criteria, the Standard will permits a measured flexibility for R&D investments. R&D involving sectors for which Climate Bonds has not yet developed eligibility criteria, will be individually assessed on a case by case basis. The eligibility of R&D expenditure must be continually assessed to ensure that the relevant climate-related goals are being achieved. 

R&D expenditures eligible under the Climate Bonds Standard v4.0 are aimed at solutions expected to have substantially lower life-cycle GHG emissions than best commercially available technologies or which substantially improve their technological and economic feasibility.  Eligibility of later stage R&D can be demonstrated through patents, permits, or third-party verified life-cycle assessments following established standards.


Flexibility pocket of 5% in CBS v4.1 as related to Use-of-Proceeds:

This revision is consistent with the flexibility pocket included in the recently enacted EU Green Bond Standard while maintaining the rigour and best practice characteristics of the Climate Bonds Standard. 

Under CBS v4.1, a minimum of 95% of net proceeds must finance projects that meet the Climate Bonds Sector Eligibility Criteria.  A maximum of 5% of the proceeds of a certified debt instrument may go towards financing projects or assets not fully aligned with the eligibility criteria, provided such projects/assets comply with the ICMA Green Bond Principles or the ICMA Social Bond Principles.  Additional requirements that apply to this flexibility pocket are the exclusion of fossil fuel and deforestation activities as well as full disclosure of the nature of these finance activities.


Expanding the network of independent external reviewers:

Certain types of regulated entities, such as Credit Rating Agencies, which are subject to publicly disclosed regulatory frameworks and otherwise meet the strict professional competence requirements of the Standard, may apply for the status of Approved External Review Providers, where their internal processes and procedures are deemed to be at least equivalent to internationally accepted assurance standards


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These proposals are built on the foundations of Climate Bonds’ Transition Principles, Transition Categories and Credible Transition Hallmarks detailed in our two papers: 

They have also been informed by a review of all similar frameworks and initiatives tackling the requirements in a credible Transition Targets and Transition Plan, including but not limited to, GFANZ, TCFD, ACT, SBTI, UK one, EU Platform for Sustainable Finance, ICMA’s SLD Principles and Climate Finance Transition Handbook.  

Unlocking 1.5-Degree Alignment: New Climate Bonds Standard and Certification Scheme
Disclaimer: The information contained in this document does not constitute investment advice in any form or any invitation or inducement to engage in investment activity 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 any content on any external website. Certification under the Climate Bonds Standard relates exclusively to the conformity of one or more designated debt instruments, designated assets and/or designated entities with the applicable Climate Bonds Standard at the time of certification. Certification under the Climate Bonds Standard carries no implication (and should not be understood as carrying any implication) as to any other aspect of any debt instrument or investment product or any collection of debt instruments or investment products or any asset or entity or group of assets or entities or as to continuing conformity at any time after the time of certification. In particular, such certification carries no implication (and should not be understood as carrying any implication) that any stated target has been or will at any time be met or that any particular legal or regulatory requirement has been or will be satisfied. The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or (subject to the previous paragraph) any other aspect of any debt instrument or investment product or any collection of debt instruments or investment products or any asset or entity or group of assets or entities and no information within this document should be taken as such, nor should any information in this document be relied upon in making any investment decision. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind, for any investment made by an individual or organisation, 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 document.