Standard

The Climate Bonds Standard is a screening tool for investors and governments which allows them to easily prioritize climate and green bonds with confidence that the funds are being used to deliver climate change solutions.

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Eligible Debt Instruments

Debt Instruments which can be Certified under the Climate Bonds Standard V2.1

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 (at Dec2016): NAB, ANZ, ABN AMRO, Axis Bank, Westpac, Deutsche Kredit Bank, Treasury Corporation Victoria, NTPC
Use of Proceeds 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 (at Dec2016)New York MTA, San Francisco PUC

This definition includes Certificates of Participation

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 (at Dec2016): AP Renewables, Inc (with ADB), ReNew Power
Securitized Bond

A bond collateralized by one or more specific Eligible Projects & Assets, including but not limited to covered bonds, Asset Backed Securities (“ABS”), Mortgage Backed Securities (“MBS”), and other structures such as Collateralized Debt obligations (“CDO”). The first source of repayment is generally the cash flows of the assets.

Certified Climate Bonds (at Dec2016): Flexigroup, Obvion
Schuldschein Loans 

A traditional German floating or fixed debt instrument with a typical maturity of 2 to 10 years and a typical volume of EUR 10 to 500m. Some features of a Schuldschein are similar to those of loans, others are more similar to bonds.  

Certified Climate Bonds (at Dec2016): Nordex

Legally speaking, a Schuldschein is a certificate of indebtedness evidencing a loan (or a cash deposit) and is not a debt security. 

Green Bond Fund

A fund which invests in green bonds based on a set of screens or criteria. This includes exchange traded fund (ETF), which is a marketable security that tracks a green bond index.  

Example 1: IFMR Capital (India)

Screens could include underlying assets must meet the sector-specific criteria of the Climate Bonds Standard.

Loan Facility

A credit line made available to borrowers to finance projects or for other purposes.  A loan facility can use a set of screens or criteria to identify which underlying assets can be financed via the facility.

Example 2: ABN AMRO and OVG (Netherlands)

Screens could include underlying assets must meet the sector-specific criteria of the Climate Bonds Standard.

Convertible Bonds 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 or note was Certified when it was issued and then later converted to equity, then its status as a Certified Climate Bond would end at the point of conversion.

Certificate of Deposit

An instrument which is generally issued by commercial banks and has a fixed maturity date (usually between three months and five years) and specified coupon and payment dates. 

After issue, certificates of deposit are tradeable in a similar way to bonds and are often quoted on a yield basis. 

Syndicated Loans

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-efforts deals and club deals.

Usually structured, arranged, and administered by one or several commercial banks or investment banks. Also includes 'non-bank' lenders, notably hedge funds or pension funds, which can also be lending parties in syndicated loans.
Bilateral Loan

A loan agreement between one lender and one borrower.

May be transferable.
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.
Repurchase Agreements Also known as Repos or buybacks—are Treasury securities that are purchased from a dealer with the agreement that they will be sold back at a future date for a higher price.  These agreements are the most liquid of all money market investments, ranging from 24 hours to several months. 
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. 

Yield Co A company that is formed to own operating assets that produce a predictable cash flow, primarily through long term contracts.

Yield cos are commonly used in the energy industry, particularly in renewable energy. They serve the same purpose as master limited partnerships (MLPs) and real estate investment trusts (REITs).

Capital lease

A contract entitling a renter to the temporary use of an asset. Capital leases have economic characteristics of asset ownership for accounting purposes.  

The capital lease requires a renter to add assets and liabilities associated with the lease if the rental contract meets specific requirements.

 

If you are interested in certification of a type of bond which is not covered by the definitions above, please contact certification@climatebonds.net for further information.