Certification is simple!
ALIGNMENT WITH ISSUANCE PROCESS
The Climate Bonds certification process has been designed to work in parallel with the normal bond issuance process:
- Pre-Issuance: the period when the bond is formulated, confirmed, launched, registered, priced and marketed
- Post-Issuance: the period from issuance of the bond through to allocation of the net proceeds to eligible projects & assets, and then ongoing for the term of the bond.
Certification of a Climate Bond at the Pre-Issuance phase enables the issuer and underwriters to market the bond as Climate Bond Certified in their roadshow. Further assurance activities in the Post-Issuance phase must be undertaken to maintain the Climate Bond Certification.
Although not mandatory, Issuers can also engage a verifier for regular assessment throughout the tenor of the bond. This may provide issuers and investors with additional comfort in the ongoing status of the Climate Bond.
THE CERTIFICATION PROCESS
A prospective issuer of a Climate Bond should begin by filling out the Climate Bond Information Form (available here) as much as possible. This should be submitted to the Climate Bond Standard Secretariat (email@example.com) and needs to be updated by the issuer throughout the certification process.
The issuer should then engage an approved (third party) verifier (See the full list of approved verifiers) to check that:
- the projects & assets to be financed by the bond proceeds are eligible under the Climate Bond Standard, and
- the issuer has established internal processes and controls to keep track of how the bond proceeds are used and produce regular reports.
The verifier provides the issuer with a Pre-Issuance Verifier’s Report which states whether the bond conforms with the Pre-Issuance requirements of the Climate Bond Standard.
Once the verifier has finalised its report, the issuer includes this in its application for certification to the Climate Bond Standards Secretariat, which is reviewed by the Climate Bond Standards Board. This application is made up of three documents:
- Climate Bond Information Form
- Verifier’s Report for Pre-Issuance
- Certification Application & Agreement
The Certification Application & Agreement (available for download here) is a legal document which should be checked by the issuer’s legal department and then signed by an authorised representative of the issuer.
The Climate Bonds Standards Board awards certification based on these documents. On approval, the issuer will receive a formal Certification Letter as well as a Certificate to confirm the decision by the Standards Board.
Once Certification has been provided at the pre-issuance stage, the issuer can use the Certified Climate Bond mark and other relevant statements in their marketing material for the bond.
After the bond has been issued and the bond proceeds have begun to be allocated to projects & assets, the verifier which prepared the Pre-Issuance Verifier Report must be re-engaged to confirm that the bond conforms with the Post-Issuance requirements of the Climate Bond Standard. The verifier provides the issuer with a Post-Issuance Verifier’s Report which includes a formal assurance statement on whether the bond meets all of the requirements of the Climate Bond Standard.
The issuer then provides an updated Climate Bond Information Form and the Post-Issuance Verifier’s Report to the Climate Bond Standards Secretariat for review by the Climate Bond Standards Board. If the Standards Board is satisfied that the bond meets all of the requirements of the Climate Bond Standard, then they confirm the Climate Bond Certification. This certification is then valid for the term of the bond.
See the diagram below for an overview of the steps to follow.
An issuer may also choose to repeat the assurance and certification process on a periodic basis after the Post-Issuance phase. It is important to note that annual reporting is mandatory for all Certified Climate Bonds throughout the entire term of the bond, but annual assurance is not mandatory.
Issuers find that costs for Climate Bond Certification fall into two categories: internal and external.
Internal costs are based on the issuer establishing the required internal processes and controls for selection of projects & assets, allocation and management of proceeds, and regular reporting. There may also be some costs associated with tracking the performance or impacts of specific projects & assets included in the Climate Bond.
External costs are generally made up of two components:
- Engagement of the verifier for pre-issuance and post-issuance assurance procedures and reports, and perhaps periodic assurance as well. The cost is based on commercial negotiations between issuers and verifiers.
- Registration of the bond with the Climate Bonds Standard Board, which is a certification fee equivalent to one tenth of a basis point of the bond principal. For example, on a USD 500 million bond, the certification fee is USD 5,000. Certification fees contribute to funding the development of the Climate Bond Standards and the operation of the Certification Scheme.
For more information email firstname.lastname@example.org