CBI – Climate Bonds Initiative

Climate Bonds Initiative
Source:	Climate Bonds Initiative
Sector:	Finance
Prerequisites:	none
Classification	Systemic/ structural
Potential Impact:	High
Resource Impact:	Moderate
Timing Implications:	Impact would take effect as certification of standards is awarded
Country/Region	Global
Application to Armenia	By introducing the Climate Bonds Taxonomy of the Initiative and starting the certification process for new bonds, Armenia would benefit from the international recognition. Having certified green bonds, which could be developed with technical assistance from the Initiative, would attract international investors interested in the green benefits.

The Climate Bonds Initiative (CBI) is an international organization working to mobilize the $100 trillion bond market towards climate change solutions. The investor-focused, not-for-profit Initiative promotes investment in projects and assets necessary for a rapid transition to a low carbon and climate resilient economy.

The strategy is to develop a large and liquid Green and Climate Bonds Market that will help drive down the cost of capital for climate projects in developed and emerging markets; to grow aggregation mechanisms for fragmented sectors; and to support governments seeking to tap debt capital markets. The work of the Initiative is an open source public good and falls into three workstreams.

The Initiative generates market intelligence through reporting on green bond market evolution, sizing of the climate bonds universe, and demonstrating green infrastructure pipelines. The Initiative produces several reports (Green bonds: State of the Market, quarterly highlights, regional and country-specific reports and updates) which track post-issuance reporting and green bond pricing in the primary market, green bond underwriter league tables and stock exchanges with green/sustainability bond segments. The Initiative also issues thematic reports on sectors and structures used in the market, as well as guides to facilitate issuance. Two additional tools are the Market blog, designed as both a journal of record for bond issuance and updates on investment news and research material to fixed income investment in climate solutions, and an annual survey of bonds outstanding globally related to climate change aimed to demonstrate the opportunities available to investors. Lastly, the Green Infrastructure Investment Opportunity (GIIO) program aims to identify and demonstrate green infrastructure investment opportunities around the world.
The Initiative has developed a trusted Climate Bonds Standard and Certification Scheme designed as an easy-to-use tool for investors and governments to assist them in prioritizing investments that truly contribute to addressing climate change. The Standard is a public good resource for the market based on the Climate Bonds Taxonomy, which defines investments that are part of low carbon economy. The Climate Bonds Standard is overseen by a Board representing $32 billion of assets under management.
The Initiative’s third stream of work is to develop policy models and advice for government, finance and industry such as:
- How to boost bank lending to renewables by adapting the $3 trillion covered bonds market to create renewable energy covered bonds.
- Delivering on the promise of large-scale energy efficiency (e.g. getting to 85% of housing stock within 10 years).
- Policy risk insurance for renewable energy bonds, to be provided by a consortium of governments.

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The Initiative has facilitated rapid growth in the global green bonds market, playing a particularly important role in establishing the standard and the certification process, and continues to identify high-priority markets and activities, and analyze the financial model required to prioritize projects and initiatives with the highest impact on global de-carbonization.

Table 1: Key Features of the Climate Bonds Standards v3.0

Specification	Detail
Improved Issuer Guidance	The standard now provides specific guidance for the issuers on establishing a robust green bond framework. There is guidance on the role that the document plays in labeling and transparency. The standard v3 mandates public disclosure of green bond frameworks.
Ongoing reporting	The standard mandates annual reporting known as the Update Report to maintain certification of the bond. Detailed guidance on the contents of the Update Report is provided within the standard, and this can include eligibility reporting, allocation reporting and impact reporting. Impact reporting is encouraged but not mandatory. The standard v3 mandates public disclosure of Update Reports.
Improved disclosure	The standard sets out requirements for pre-issuance and post-issuance certification of the bond. Both requirements have to be met by the issuer to maintain certification. Post-issuance requirements are disclosed in the Update Report. Standard v3 encourages further disclosure at the pre-issuance stage by requiring the issuer to include a list of the proposed projects and assets in the bond disclosure documentation unless there are reasons why that detail cannot be provided, such as confidentiality, competitive considerations etc.
Robust verification	A thorough assurance framework with independent verifiers, following consistent procedures. The approach under the climate bonds standard aligns with the proposed approach for verification under the EU green bond standard.
Stronger definitions for use of proceeds and expenditure	Clear definitions on the low carbon and climate- related attributes of eligible projects and assets in order to avoid confusion about ownership, indebtedness or “other related and supporting expenditure”. This is in line with GBP 2018 which includes related and supporting expenditure