Climate Bonds Initiative teams up with UN for first steps of resilience taxonomy

CBI and UN Office for Disaster Risk Reduction launch whitepaper on planned taxonomy, start recruiting for technical working groups.

The Climate Bonds Initiative (CBI) has teamed up with the UN Office for Disaster Risk Reduction (UNDRR) to launch a white paper on the development of a climate resilience taxonomy.

The report references Climate Policy Initiative data which shows resilience and adaptation efforts received an average of $46 billion of funding a year in 2019-20 against $586 billion which went to mitigation. Less than $1 billion of adaptation and resilience financing came from the private sector.

In the fixed income space, only 19 percent of ESG-labelled bonds directed any proceeds towards resilience and the vast majority of these came from the developed world.

Current flows, it continues, are “way below” estimated requirements, with developing countries alone in need of $300 billion a year by 2030 according to UNEP estimates.

The proposed framework sets out a series of seven themes for resilient investments: agrifood systems, cities, health, infrastructure, industry and commerce, nature and biodiversity, and societies.

Under each of the themes, the framework aims to provide criteria for identifying and screening investments by sector and subsector.

The white paper notes that a series of investment types could be within scope. These include specific targeted measures to improve resilience, specific physical assets, activities delivering a substantial contribution to resilience, and entities which make a substantial contribution either through assets or activities

Previous work by the CBI has looked at asset-focused (enhancing the climate resilience of assets or activities) and system-focused (improving the resilience of broader systems) investments. By contrast, the white paper proposes borrowing the EU taxonomy’s adapted/enabling standard as it is more widely used.

To be eligible for the taxonomy, investments must deliver a substantial contribution to achieving climate resilience outcomes in response to relevant climate change impacts, although the framework will not judge the actual exposure to climate impacts as part of determining the substantial contribution.

Investments must also fulfil Do No Significant Harm Criteria and should avoid contributing to maladaptation, such as shifting vulnerabilities to other groups, decreasing welfare or contributing to inequitable outcomes.

The CBI and UNDRR are calling for industry experts, scientists and academics to join their working groups. A resilience technical advisory group will oversee wider development, while a technical working group will be set up to look at each of the seven themes. The CBI is also looking to convene a group of existing or potential issuers of thematic instruments.

In addition, the UNDRR has convened an investor working group, which will explore how the taxonomy can help mobilise finance towards adaptation and disaster risk reduction.

Members of the group include Ulf Erlandsson, founder and CEO of fixed income think tank the Anthropocene Fixed Income Institute; Winston Ma, former head of the China Investment Corporation’s North America office; and Chris Hulatt, co-founder of Octopus Investment. It will be chaired by Warren Pimm, senior managing director at advisory firm Pan American Finance.