Markets working to support sustainable development

Climate Bond Standard

The Climate Bond Standard is designed to ensure that climate and green bonds are being used to deliver climate change solutions

The standard  three parts:A) General requirements. This part sets out the requirements that apply to all climate bonds and include clauses about the use of proceeds, environment and social integrity, verification procedures, non-compliance and non-contamination.B) Low-carbon contribution. This part sets out which projects and physical assets are eligible for the standard. It requires that projects must be contributing to the development of low-carbon industries, technologies and practices. It also includes references to specific technical criteria that are required for certain projects and physical assets.C) Bond structures. This part sets out clauses specific to certain bond-types.

Market coverage: 

The Climate Bond Initiative valued the market for climate-themed bonds at $503.6billion (2014), of which $18billion is generated by certified climate bonds. It is unclear how much of this is covered by Climate Bond Standard but in September 2014 the first project in the UK received certification: Big60million. To date (October 2014), £3.4 million in solar bonds have been purchased and reserved through the project.

Background information: 

The Climate Change Initiative is a project of CDP (formerly known as the Carbon Disclosure Project) and the Network for Sustainable Financial Marketst was launched at COP15 in Copenhagen in 2011. The Standard was also launched later that year.

Currently, the certification scheme is only available to projects and physical assets in the solar and wind energy industries. The Climate Bond Initiative is in the process of finalising further schemes for the transport, water, bioenergy and sustainable agriculture and forestry industries. Meanwhile, public consultation is ongoing to create schemes for bus rapid transit and energy efficient buildings.

Funding source: 

The Standard is financed by certification fees, as well as sponsorship and grants from the National Australia Bank, Bank of America Merrill Lynch Foundation, European Climate Foundation and the Sainsbury Family Charitable Trusts.

Notable information: 

The Climate Bond Standard is flexible in terms of currency; the bond does not have to be in the same currency as the project. For example, a project could be based in a country that uses euros but the bonds could be in dollars.