Bonds and loans which are verified to conform with the Climate Bonds Standard are called Certified Climate Bonds. The Standard contains scientific criteria consistent with the 1.5 degrees Celsius target declared in the 2015 Paris Agreement.
In order to receive the Certification mark, a prospective issuer must appoint an Approved Verifier, who will provide assurance that the bond meets the Climate Bonds Standard’s requirements. The Climate Bonds Standard Board provides the final confirmation of all Climate Bond Certifications.
The Climate Bonds Standard allows Certification of a bond prior to its issuance, enabling the issuer to use the Climate Bonds Certification Mark in the bond marketing efforts and investor roadshows. After the bond has been issued and allocation of the bond proceeds has begun, the issuer must confirm the Certification by obtaining another assurance (the "Post-Issuance") report and providing that to the Climate Bonds Standard Board.
The Scheme acts as a universal adapter across jurisdictions. It incorporates the Green Bond Principles and Green Loan Principles and is aligned with the proposed EU Green Bond Standard and the guidelines and rules in China, ASEAN, Japan, India and other countries and regions.
Here is a short introductory video on the Climate Bonds Initiative Certification Scheme:
What sectors are available for Certification?
Bonds are verified according to the type of physical assets or infrastructure which they fund. The most up to date list of sectors which may be involved in a Certified Climate Bond may be found here in the Sector Criteria page.
Here is a step-by-step video on how to use the Climate Bonds Initiative Sector Criteria:
Two options: Individual (one-off) Certification, and Programmatic Certification (repeat)
Programmatic certification streamlines the certification process for issuers who plan to issue multiple certified bonds against a large pool of assets. Rather than going through the process of certification for each bond issuance, the whole pool is certified at the beginning, at the time of the first bond's issuance. This approach makes the process significantly simpler for the issuer.
Here is a step-by-step video on how individual and programmatic certifications work:
General information on how to issue a green bond
Here is a quick, step-by-step video with a general overview of how to issue a green bond:
Benefits of Certification
1) Robust label Certification allows issuers to demonstrate to the market that their bond meets best practice standards for climate integrity, management of proceeds and transparency. Assets that receive Certification are aligned with the Paris Agreement of 1.5C degrees of warming, ie net zero emissions by 2050 or earlier. The issuer will also manage their bond proceeds properly.
2) More diverse investor base: Most issuers find that the range of investors interested in their bond is much broader compared to their usual group of investors. These investors will be more "sticky", ie they hold their debt for longer. There may sometimes be pricing advantages / benefits, depending on the circumstances, because of this increased investor demand for their bond.
3) Easier-to-find: Ceritification allows potential investors to quickly find a credible green / climate bond on providers of market information.
4) Enhanced reputation: Certification allows an issuer to associate its organisation with efforts to scale up financial flows for delivering the low-carbon economy and securing prosperity for future generations.
5) International Standard: This is the only green bond standard / label that is used internationally, by issuers in 30 countries.
What is innovative about the standard is that it allows not only obvious project bonds for renewable energy generation or green portfolio bonds to be labelled as ‘Climate Bonds’, but it also allows corporate bonds to be linked with low-carbon activities, without compromising on the normal credit ratings of the issuer.
A robust and credible standard eases decision-making and focuses attention on credible climate change solution opportunities. The easier it is to use the faster the market will grow.
Investors can use the Climate Bonds Standard as a screening tool to assure the low-carbon nature and integrity of their fixed-income investments.
While Certification as conforming with the Climate Bonds Standard does not provide any assurance regarding credit risks or returns, it does allow investors to save time and money in analysing low-carbon credentials of investments across sectors and asset classes. The investors can do less due diligence themselves to screen the bonds, because the Certification is guaranteeing greater transparency and consistency.
A liquid market of Certified Climate Bonds also allows investors to actively participate in the delivery of the Low-Carbon Economy in three key ways:
1) Proactively hedge against future climate risks by financing a low-carbon transition
2) Signal to the market their appetite for suitably risk-adjusted green deal-flow; and
3) Signal to governments their willingness to invest in the low-carbon transition subject to stable policy frameworks and risk-adjusted returns.
Who can issue Certified Climate Bonds?
Certified Climate Bonds can be issued by a variety of different organisations seeking to finance or re-finance low-carbon developments. The focus for green bond Certification is the low carbon 'portfolio' or 'projects & assets' being financed by the green bond, rather than the entity which is issuing it, such as:
- Project developers
- Equipment manufacturers
- Local Governments
- State backed entities
- National Governments (sovereign)
Technical Documents and other resources to understand more
To understand more about how Certified Climate Bonds fit into the wider scene of Climate Bonds please subscribe to our blog.
Download the Brochure (September 2021)
If you are interested in having a bond Certified or would like more detail on the steps involved, please contact directly: firstname.lastname@example.org
Disclaimer: "The Climate Bonds Standard Board operates legally as an advisory committee of the Climate Bonds Initiative Board and oversees the development of the Climate Bonds Standard. Neither the Climate Bonds Standard Board nor any organisation, individual or other person forming part of, or representing, the Climate Bonds Standard Board (together, "CBSB") accepts or owes any duty, liability or responsibility of any kind whatsoever to any issuer which wishes to apply for any of its bonds to be certified under the Climate Bonds Certification Scheme ("Scheme"), or to any issuer whose bonds may at any time be certified under the Scheme or to any other person or body whatsoever, whether with respect to the award or withdrawal of any certification under the Scheme or otherwise. All advice or recommendations with respect to any certification under the Scheme or otherwise that CBSB provides to the Climate Bonds Initiative Board is provided to it in an advisory capacity only and is not to be treated as provided or offered to any other person”