Green bond standard launched to verify environmental impact and eligibility

Bonds that pass will be given the label ‘Climate Bonds’.

The Climate Bonds Initiative has published its first agreed ‘standard’ to enable investors to check whether the investments made by so-called green bonds support real CO2 reduction targets. The standard was approved by the Climate Bond Standards Board, a group of institutional investors and leading environmental NGOs consisting of the California State Teachers’ Retirement System (CalSTRS), the Natural Resources Defense Council, the California State Treasurers’ Office, the Investor Group on Climate Change (IGCC), the Carbon Disclosure Project and the Ceres Investor Network on Climate Risk (INCR). The initiative said that the standard would also address the traceability of funds and types of bonds than can be certified. It said eligibility criteria for these different types of bonds would be released progressively over the coming year. Bonds complying with the new standard will be certified as ‘Climate Bonds’. Jack Ehnes, CEO of CalSTRS, said, “We are looking for investment-grade returns that also address climate change. The Climate Bond Standard will allow us to know that investment opportunities put before us will be the right ones to build a low carbon economy.” The standard allows for certification of bonds backed by or linked to low carbon assets.These include project development bonds, corporate bonds linked to a pool of loans to compliant assets or to the physical assets themselves, and bonds issued by securitization vehicles of individual loans to finance physical assets or equity investments in physical assets. Certification costs one-tenth of a basis point of the value of the bond and issuers will also be required to commission a third party review of their compliance through approved third-party verifiers. Some $12bn of bonds backed by investments related to climate change solutions have already been issued internationally according to the Climate Bonds Initiative Issuance List. It said that growing this “green debt” market would provide institutional investors with opportunities to switch from carbon intensive to low-carbon investments. According to the International Energy Authority, approximately $1 trillion a year is required in mitigation and adaptation investments by 2050 to avoid dangerous climate change. Separately, the Global Canopy Programme has issued a report aimed to increase the understanding of Forest Bonds: Link