Dubai Islamic Economy Development Centre Collaborates with Dubai International Financial Centre, Dubai Financial Market, Climate Bonds Initiative to Grow Green Sukuk Market

Dubai Islamic Economy Development Centre (DIEDC) today signed a memorandum of understanding (MoU) with the Dubai International Financial Centre (DIFC), the Dubai Financial Market (DFM), and Climate Bonds Initiative (CBI) to collaborate on growing the green Sukuk sector and stepping up the exchange of knowledge and expertise in the field.

In a media statement, DIEDC advised the MoU signing took place at DIFC head office. 

Signatories from the various participating entities included Abdulla Mohammed Al Awar, CEO of DIEDC, Arif Amiri, CEO of DIFC Authority, Hassan Al Serkal, Chief Operating Officer (COO) and Head of Operations Division of DFM, and Sean Kidney, CEO of Climate Bonds Initiative.

The Statement notes that: 

“The agreement aims to promote the issuance of green Sukuk in the UAE and across the world, in addition to developing the standards of certification for green Sukuk along the lines of the Climate Bonds Standard and Certification Scheme. 

CBI developed the Climate Bonds Standard, a set of eligibility criteria to determine whether a relevant bond can be categorised as ‘green’, thereby enabling investors to make informed decisions about the bond’s environmental credentials. 

Meanwhile, CBI’s Climate Bond Certification Scheme is the only accreditation mechanism for green bonds that is globally accepted. Together, the Climate Bonds Standard and Certification Scheme serve as a benchmark for all such green certifications and comprise a robust pre- and post-issuance assurance framework.”

Earlier this year, DIEDC, DIFC andDFM, joined forces to form the Dubai Sustainable Finance Working Group, aimed at achieving the UAE’s NDCs (nationally determined contributions) to the UN’s Sustainable Development Goals and the strategic objectives of Dubai Plan 2021. The Group works to develop Dubai’s financial services sector and shape a sustainable financial hub in the region, focused on environmental, social, and governance (ESG) integration, cultivating green companies and green financial instruments including green Sukuk, as well as encouraging long-term responsible investment for a sustainable future.

Who’s saying what: 

Abdulla Mohammed Al Awar, CEO of DIEDC: 

“Through the MoU, DIEDC and its partners aspire to maximise the potential of the Islamic economy sectors, particularly Islamic finance, and contribute to increasing the number of businesses from the Far East that tap into these sectors.”

“This agreement builds on the Centre’s vision and lays down the foundation for promoting green Sukuk locally and internationally. The demand for green Sukuk is steadily growing and requires an appropriate certification scheme that allows the segment to flourish.”

“We are confident in our choice of partners for this important project. Our collective expertise will no doubt accelerate the growth of this market, and we invite all relevant stakeholders to come forward and contribute to this worthwhile endeavour.”

Arif Amiri, CEO of DIFC Authority:

“Sustainable finance is fundamental to driving the future of finance in the region and across the globe.  DIFC shares a common goal with DFM and DIEDC to build a strong and sustainable financial services sector in Dubai, the UAE and across the wider region. Through this collaboration, and by partnering with Climate Bonds Initiative, we are reinforcing the synergies between ESG and Islamic Finance, allowing us to lead the way in ethical financial solutions.”

Hassan Al Serkal, COO and Head of Operations Division of DFM:

“As the first Islamic sharia-compliant exchange globally since 2007, DFM implements numerous initiatives to strengthen Dubai’s position as the capital of Islamic economy globally in collaboration with prominent institutions in the UAE and beyond. The Green Sukuk Initiative is a significant step in the joint efforts to create favourable standards and regulations that support the development of the Islamic economy.”

“DFM is specifically playing an active role in this sector through its sharia standards on issuance and trading of shares, Sukuk as well as the investment funds that have focused on the green financial instruments.”

“Similarly, DFM is promoting best practices of sustainability amongst market participants and is looking to become the region’s leading sustainable financial market by 2025 in line with Dubai’s sustainability and green economy drive, especially given the fact that responsible investing, sustainability and environment protection are some of the key objectives of Islamic sharia.”

Sean Kidney, CEO, Climate Bonds Initiative:

“Scaling up green Sukuk is absolutely vital to meeting the climate finance challenge we all face. This agreement provides a new platform for cooperation around growing regional and global green Sukuk, compatible with international standards. It signals a new phase of stakeholder cooperation to build investor confidence and market opportunities for green investment.” 

The full Statement can be read here.

تنمية سوق الصكوك الخضراء لتعزيز النمو الاقتصادي المستدام

‘Till next time

Climate Bonds  

Guidance for governments, investors & banks to determine when projects & assets are compatible with a climate resilient economy

Framework for accelerating climate resilient investments in green bond markets

Climate Week NYC - US market launch 

New Climate Resilience Principles (CRP) were presented today at the Global Adaptation & Resilience Investment Working Group (GARI) event during Climate Week NYC.  

CRP provide a high-level guidance for governments, investors and banks to determine when projects and assets are compatible with a climate resilient economy. This major development programme was set in motion by an Adaptation and Resilience Expert Group convened by Climate Bonds in November 2018. 

The Climate Resilience Principles were developed as a partnership between the Climate Bonds Initiative, the World Resources Institute (WRI) and Climate Resilience Consulting using an Adaptation and Resilience Expert Group (AREG), comprised of more than 30 specialists from leading international authorities in the adaptation and resilience space. 

The Principles essentially require measures to be taken (in asset or project design, construction or adaptation) that ensure the asset or project is 'fit for purpose' in the face of a changing climate. They are the following, (see Table 1 below for details): 

1. Boundaries and interdependencies for assessing climate risks and resilience impacts are clearly defined
2. Physical climate risk assessment undertaken - using both top down risk assessment and observed data. 
3. Risk reduction measuresundertaken– commensurate with coming climate change and operational life
4. Climate resilience benefit assessment undertaken
5. Mitigation trade-offs- the asset or activity must not lock in fossil fuels or undermine any international or national commitments.
6. Ongoing monitoring and evaluation as risks evolve

The Principles come at a time when adapting to climate risks opens new opportunities, in both developed and emerging economies, in areas including heat-resilient building materials, water-efficient technology (embracing drip irrigation) and early warning systems for climate hazards, among many others. 

EBRD issues first Climate Resilience Bond 

The CRP already have started to facilitate climate resilience issuance. Last week the world’s first ever Climate Resilience Bond (USD700m) was successfully brought to market by European Bank for Reconstruction and Development (EBRD). 

Environmental Finance reports a coupon of 1.625%, with the bond issued at 99.466% for a yield of 1.737% – 9.2 basis points over the five-year Treasury. Goldman Sachs, BNP Paribas and SEB were joint bookrunners on the transaction, which saw demand from approximately 40 investors in 15 countries.

The ERBD statement advises proceeds from the four-year bond will be used to finance the Bank’s existing and new climate resilience projects. These will typically fall under one of three categories:

• Climate resilient infrastructure (e.g. water, energy, transport, communications and urban infrastructure)
• Climate-resilient business and commercial operations; or
• Climate-resilient agriculture and ecological systems.

The projects earmarked for the Use of Proceeds are selected and managed in alignment with the Climate Resilience Principles.

More information can be found on the EBRD green bond information page. 

The CRP Framework

The CRP are divided into three parts, illustrated in Figure 1 and briefly summarised in Table 1:

Part I: Framing principles: This addresses the key preliminary aspects that need to be considered as they inform the risk and benefit assessments undertaken in Part 2. Namely, determining the asset’s or project’s boundary and interdependencies with the systems of which it is a part.  

Part II: Design principles: These address the climate risk assessment needed to be undertaken in order to design and implement investments that appropriately address those risks. This includes understanding physical climate hazard, exposure and vulnerability, and potential trade-offs between climate resilience and climate mitigation impacts. For investments focused on enhancing the resilience of the system, this also includes a resilience benefits assessment. 

Part III: On-going management principle: This addresses the need for ongoing monitoring and evaluation to ensure resilience actions remain in step with evolving climate hazards, exposure and vulnerability, and changing opportunities and needs for resilience benefits. 

Figure 1: Overview of the Climate Resilience Principles

Table 1: The Climate Resilience Principles 

Who’s saying what: 

Sean Kidney, CEO, Climate Bonds Initiative: 

“Climate change is accelerating; the US is already experiencing crazy fires, hurricanes and floods, extreme because of the impact of climate change. While we work hard to reduce emissions to avoid catastrophic consequences, we now also have to address the challenge of what will be, unfortunately, a century of extreme climate volatility and rising sea levels.”                 

The Last Word

The CRP will allow for a large uptake of new resilience-based investments. 

All the recommendations within the Climate Resilience Principles are aligned with the proposals on adaptation in the EU Taxonomy of Sustainable Finance. 

Climate Bonds Initiative will now reconvene sector-specific Technical Working Groups who will use the Principles to develop sector-specific Criteria so that green bonds delivering climate resilience can be recognised and Certified under the Climate Bonds Standard. 

In summary, the CRP represent a new stage to increasingly align investment towards the climate impacted world to come. 

‘Till next time

Climate Bonds 

Find out more on our CRP Page. 

Download the Climate Resilience Principles. 

Measures to address systemic climate risks & aid shift in capital allocation: Expanded role for central banks to green global financial system

Responding to the risks 

Developing a brown taxonomy, shifting purchasing towards green assets and reviewing the doctrine of market neutrality are amongst the measures central banks and financial regulators (CBFR) should apply to address the systemic risk climate impacts pose to the global financial system. 

Produced by Climate Bonds Initiative in conjunction with the SOAS Centre for Sustainable Finance and WWF, Greening the Financial System: Tilting the playing field - The role of central banks is being released in the lead up to this year’s World Bank/IMF annual meetings in Washington D.C. 

Shifting capital to support transition 

Greening the Financial System analyses global progress by central banks in addressing climate issues. It advocates accelerated action by central banks and micro prudential regulators including greater use of prudential and regulatory powers, central bank asset purchases and credit guidance policy to:  

• reduce systemic financial sector vulnerability to climate risks; 
• increase global green capital allocations;
• support transition amongst banks, insurers and other financial institutions. 

Major Recommendations: 

• Central banks should develop a brown taxonomy. Central banks are uniquely concerned with the systemic risks to the financial system arising from financial institutions’ ownership of brown assets which are increasingly vulnerable to sharp revaluations and pricing volatility from climate mitigation policy and physical risks.

• Central banks are major purchases of financial assets. The Eurozone central banks bought EUR2.6tn of assets (10% of Eurozone countries’ GDP) through the Asset Purchasing Programmes which are still replenishing holdings. Greening the Financial System recommends purchases be deliberately skewed to buying green assets, including assets on the primary market and recommends the doctrine of market neutrality be removed.

• Central banks, through setting haircuts and weightings of different assets, greatly influence the assets held by banks and insurance companies for prudential regulation. Greening the Financial System recommends that the brown taxonomy be used to discourage use of brown assets as these are increasingly vulnerable to climate risks not yet captured by current climate models.

• Central banks are understandably opposed to making the prudential regulations less stringent. Accordingly, they should test whether green supporting factors could be applied to offset some of the impact of using the brown penalising factors. Such a policy would encourage investment in green technologies through increasing the demand for the assets for regulatory purposes. 

Who’s saying what? 

Ulrich Volz, Founding Director of the SOAS Centre for Sustainable Finance, SOAS University of London: 

"Central banks and financial supervisors have a key role to play in ensuring that the financial sector addresses climate and other environmental risks and that financial flows are aligned with the Paris Agreement. Financial governance can be only part of a broader public policy response to addressing the climate crisis, however its role cannot be overstated.”

“This report provides an excellent overview of the current state of discussion and makes proposals that merit further scrutiny. While I don't agree with all of the report's recommendations, they will contribute to a much-needed discussion that will help central banks and supervisors develop adequate policies in response to the climate crisis."

Sebastien Godinot, Head Sustainable finance, WWF European Policy Office: 

“Central banks and regulators have important powers to ensure that environmental risks are assessed, disclosed and mitigated by financial institutions. This new report is an excellent review of the actions central banks and supervisors should take forward: we hope that climate scenario testing will rapidly become a new normal and, with more environmental risk disclosure, will accelerate the discussion about how to adjust risk weightings, collateral frameworks and monetary policies with sustainability factors."

Prashant Vaze, Head of Policy and Government, Climate Bonds Initiative:  

“There is increasing recognition by central banks of the growing structural and systemic risks that climate change poses to the financial system and the need for coordinated action. The establishmentof the NGFS has been a major step forward in that process. Developing and expanding response mechanisms using central banks prudential regulation & monetary policy toolkit to offset climate risk and support orderly transition is the next stage.” 

The last word

From not so sotto voce warnings in the latest from the NGFS, to the PRI’s early 2020s scenario forecasts via the Inevitable Policy Response, to Bank of England's chief Mark Carney’s recent addresses to the UN General Assembly and the TCFD Summit in Tokyo, 'risk' flags are being waved from multiple quarters at every player in the financial system. 

CBFR have an array of measures open to them to tilt the global playing field towards transition and rapid greening of capital deployment. As with every other aspect of climate action in the coming decade, it would be prudent to accelerate their implementation. 

‘Till next time 

Climate Bonds 

Acknowledgements: Greening the Financial System - Tilting the playing field - The role of central banks has been produced by the Climate Bonds Initiative in conjunction with  WWF and SOAS Centre for Sustainable Finance.

Recommendations

$202.2bn in green bonds and loans: All-time high for the green market: More to come in 2020: Green trillions is the goal

The numbers  

Progressive green bond and loan issuance for 2019 has just passed USD200bn with Climate Bonds analysis calculating the global figure at USD202.2bn as at 22/10/19. 

Green bonds closing from Terna Energy*, EUR150m (USD167m), (the first green bond issued from Greece), and a mix of green bonds and loans from Singapore, Japan, Sweden and China, were among the deals pushing the total past the USD200bn mark. 

Progressive issuance for 2019 reached USD100bn in late June. In the last week of August it tipped over USD150bn & late September passed the 2018 total of USD173bn. 

Figure 1: Global Annual Green Bond Issuance 2015-22 Oct 2019

The five largest green bonds/loans issued in 2019 so far are from Dutch State Treasury Agency* EUR5.99bn (USD6.66bn), KfW EUR3bn (USD 3.36bn), Industrial Bank Co., Ltd. CNY20.0bn (USD2.91bn), Republic of France EUR2.47bn (USD2.77bn) and the Noor Energy 1 (ACWA Power, Silk Road Fund)* USD2.69bn green loan, funding single largest Concentrated Solar Power (CSP) site in the world.

Table 1: Ten biggest green bonds/loans to date 

Energy dominates overall Use of Proceeds at 33%, followed by low carbon buildings on 29%, low carbon transport 20%, water 9%, with waste and land use each at 3%. 

Figure 2: Use of Proceeds Breakdown for USD202.2bn at 22 Oct 2019

The rankings

The USA leads national rankings to date in 2019 followed by France, China, Germany, Netherlands, Sweden, Spain, Japan, Italy and Canada. Supranationals ranking falls between Netherlands and Sweden. 

Nine nations have issued sovereign green bonds in 2019 at USD25.8bn (approx. 13%) of total issuance for the year to date. France, Belgium, Poland, Ireland, Indonesia, Chile and Nigeria are now repeat sovereign issuers.

Figure 3: Top 15 2019 Green Bond Issuance by country at 22 October 2019

Certifications at almost 20% of the market 

Climate Bonds Certified bonds/loans for the year is almost a fifth of the market, at approx 19% (USD37.5bn) of volume via issuers demonstrating international market best practice.

The forecasts 

Climate Bonds Initiative range for 2019 is between USD230-250bn. On today’s figures we’re still on track. Looking ahead our initial forecast for CY2020 is USD350-400bn in global annual green bond/loan issuance. 

The last word: Set sights on the 2020s says Sean 

“Based on these figures, 2019 will be another record year for green finance. New sovereigns are entering the market and pioneers like France, Poland and Nigeria are now repeat green issuers. Bond size and diversity of issuers is increasing, and noteworthy is the presence of leading European and Chinese banks amongst the largest issuers. All positive signs of market maturation.”

“But $200bn or $400bn a year is not enough to address the climate emergency and provide the capital at the scale urgently required for large scale transition, adaptation and resilience.”

“From here on, every year in the 2020s must be a record year for green finance.”

“The climate challenge for global finance – regulators, banks, insurers and institutional investors – remains. Generating that first $1 trillion in annual green investment by 2021/22 is now critical. It’s the benchmark from which to measure year on year growth in climate-based investment towards 2030.”

‘Till Next Time 

Climate Bonds

* Climate Bonds Certified

Providers from Australia, China, Germany, Italy, Japan, New Zealand amongst latest to gain Approved Verifier status 

The list of Approved Verifiers to the Climate Bonds Standard in 2019 has grown to extensive global coverage, with organisations from Germany to New Zealand the latest to gain Approved Verifier status from the Climate Bonds Standards Board. 

Climate Bonds Standard & Certification Framework uses a Verification process to ensure that Climate Bonds Standard and science-based Sector Criteria are followed in the use of proceeds by the issuer. 

Verification under the Climate Bonds Standard is carried out pre and post-issuance of the bond/loan by the independent Approved Verifier, contributing to the reporting & disclosure requirements of the Climate Bonds Standard. 

New Approved Verifiers 

SinoCarbon

SinoCarbon Innovation & Investment Co., Ltd. (SinoCarbon) is an innovative think tank, state-authorised certification body focusing on energy, climate change, environmental protection, green development and other fields. One of a growing number of China based Approved Verifiers, SinoCarbon is committed to developing into a leading green and low-carbon comprehensive service to promote green development. 

Japan Credit Rating Agency

Japan Credit Rating Agency(JCR) became an Approved Verifier in August this year. Founded in 1985, Japan Credit Rating Agency, Ltd. (JCR) is one of the major credit rating agencies in Japan. JCR is the only Japanese credit rating agency registered in the United States and is a certified CRA in EU. JCR provides an independent evaluation (Rating/Scoring) and verification with its long experience in Japanese debt capital markets, together with the Japanese environmental engineering firm, E&E Solutions.

DQS CFS GmbH

DQS CFS GmbH is registered in Germany and together with its parent company, DQS Group GmbH, operates in 80 offices across 60 countries. DQS CFS’s business includes certification audits, verification of ESG indicators, external assurance on sustainability reports, environmental audits as well as training. 

Within the Group, DQS CFS is the branch that focuses on audit and assessment services related to sustainability and consumer safety. DQS Group offers assessments and certifications in various industries, to more than 200 different standards.

Deloitte

Deloitte’s Italian, German and China member firms recently joined the Approved Verifiers ranks, alongside the other member firms from France, Luxembourg and Spain. Globally, Deloitte is a founding member of the UN Global Compact (UNGC) and is also a member of the steering council of the International Integrated Reporting Council (IIRC) and a member of the “World Business Council for Sustainable Development (WBCSD)”.

Deloitte Italy, one of the largest professional services networks in Italy, first started its activity in this country in 1923 and boasts century old roots, combining a tradition of quality with avant garde methods and technological expertise. 

Deloitte GmbH Germany is registered in Germany and currently operates in Germany. It provides audit, risk advisory, tax, financial advisory and consulting services.  Deloitte Germany is a member of Econsense – a forum for sustainable development of German business.

Deloitte China is registered in Shanghai and currently operates in China, Hong Kong, Macau and Mongolia.  Its primary business is audit and assurance and other related professional services. This application is submitted by the Sustainability Services team.

Golden Credit

Golden Credit Service Co. is a leading credit consulting company in China. The company is committed to providing objective and independent verification & certification services related to green bond, green enterprise, and environmental protection. In addition, it provides consulting services of ESG risk management and sustainable & responsible development.

Golden Credit Service is entitled to qualified credit investigation institution of the People’s Bank of China (PBoC), a credit system cooperative institution of National Development and Reform Commission (NDRC), as well as member of National Association of Financial Market Institutional Investors (NAFMII)

KPMG

KPMG Australia has a long tradition of professionalism and integrity, combined with their dynamic approach to advising clients in a digital-driven world. Service areas are Audit, Assurance & Risk Consulting; Deals, Tax & Legal; Management Consulting; and Innovation & Digital Solutions. 

KPMG New Zealand has a nationwide team of 1,000+ professionals work with private businesses, publicly listed companies, Government and public sector organisations, and not-for-profits providing professional services across Audit, Tax and Advisory. 

Their people are based in all the major centres, including Auckland, Wellington, Christchurch and Hamilton. 

Global Reach of Verification Services 

The organisations under the Approved Verifiers list span the globe, some focusing on specific regions and others with a worldwide cover. These organisations have longstanding presence in the market and their experience on a vast range of areas of assessment, reporting and assurance provides support to the green bond and loan Issuers who are considering Certification for their debt.

At a Glance - Certification & Approved Verifiers

Climate Bonds Certification requires the engagement of an Approved Verifier. 

 The Approved Verifier is an organisation that has expertise in the following three areas:

1. Issuance of debt instruments in the capital markets and management of funds within issuing organisations.
2. Technical characteristics and performance of low carbon projects and assets in the areas covered by the specific criteria available under the Climate Bonds Standard.
3. Provision of Assurance Services in line with the International Standards on Assurance Engagements ISAE 3000.

An Approved Verifier follows our Assurance Framework and guidance to Certification. These guidelines provide with an assessment methodology and manage conflict of interest and impartiality of verifiers. Climate Bonds delivers training to the Verifiers and other support to verifiers. 

The EU GBS has selected the same fundamental international standards for providing assurance i.e. ISAE 3000 which are already mandated under the Climate Bonds’ procedures for verification. Our current approach to approving, training and monitoring verifiers is closely aligned with the EU’s proposed approach to qualifying verifiers. 

The Last Word

The Approved Verifiers list has grown rapidly as more issuers come to market and adopt best practice via Certification against the Climate Bond Standard and adopting best practice. 

So far in 2019, already a record year for green finance, 20% of the market volume is Certified. 

We’ve introduced a new Approved Verifier Directory to make the search and selection process easier for prospective issuers and look forward to working with verifiers as we develop the Standard and expand the reach of various Sector Criteria. 

More to come on this, 

‘Till next time,

Climate Bonds

Latest water bonds will be marketed internationally: West Coast utility cements position as a US green bond leader 

San Francisco Public Utilities Commission (SFPUC) has posted details of its newest bond offerings including a USD630m green municipal bond (2019 Sub-Series A Bonds), part of its Water System Improvement Program (WSIP).  

The Preliminary Official Statement (POS) outlines the latest transactions from the West Coast utility, with Morgan Stanley listed as lead manager, with Goldman Sachs & Co. LLC, BofA Securities, Citigroup and JP Morgan listed as co-managers. 

Their newly minted Green Bond Report identifies projects, impacts and in a welcome development, SDG alignment against goals 6,9,11,13 &14. 

US based publication The Bond Buyer is reporting a positive response from ratings agency Moody’s to all of SFPUC’s water enterprise bonds with a ratings shift from Aa3 to Aa2. 

SFPUC was the first organisation to Certify a green bond under Climate Bonds Water Criteria way back in May 2016 and was subsequently recognised in our 2017 Green Bond Pioneer Awards.

Multiple issuance since sees SFPUC amongst the global Top 10 of Programmatic Certifiers under the Climate Bonds Standard. 

Their 2018 USD400m certified green offering aimed at international investors picked up an Environmental Finance award.  

This newest offering will again be marketed internationally, the bonds will be taxable and once the transaction is completed, will take SFPUC over the USD2bn mark of water bonds certified against the Climate Bonds Standard, a new record. 

According to the Investor Presentation pricing will take place on Dec 10^th,  official statement is due on the 18th Dec and pricing on Jan 9th 2020. 

The last word

California and New York are the longstanding frontrunners on green munis in the US with issuers from states prominent in our global list of programmatic certifiers. We'll have more to say on  this in the New Year.

Meanwhile this SFPUC water bond and a debut USD281m certified issuance foreshadowed by pension fund behemoth CalSTRS will keep some focus on the west coast. Treasurer Ma has made clear her intention to build green bond markets in California, will 2020 be a bumper year? 

‘Till next time

Climate Bonds 

A label of trust for green investment 

Climate Bonds has released Version 3.0 of the international Climate Bonds Standard; a significant development for green finance.

Standard V3.0 incorporates major upgrades to the existing umbrella guidance for Climate Bonds Certification to meet market growth and demand for enhanced reporting, transparency and harmonisation around green definitions.

Climate Bonds Certification provides assurance for issuers and investors that a green debt product meets labelling requirements for major global jurisdictions, is science-based and is aligned with the goals of the Paris Climate Agreement to limit warming to under 2 degrees. 

Standard V3.0 aims to support the expansion of the green investment market – forecast to reach up to $250bn of green debt issuance in 2019,  $350-400bn in 2020 and accelerate the mainstreaming of green bonds, green loans and other products via a simple label which investors can trust. 

Universality & Compatibility 

Standard V3.0 is a major upgrade to the Climate Bonds Standard, designed to ensure compatibility with the new EU Green Bond Standard (EU GBS), the latest version of the Green Bond Principles (GBP), Green Loan Principles and recent market developments including guidelines adopted by India, ASEAN and Japan.

The new Standard V3.0 provides guidance for:  

• Robust Green Bond Frameworks: Standard V3.0 provides issuers with detailed requirements for what their Green Bond Framework document must contain.
• Ongoing Reporting: Standard V3.0 reporting requirements are more clearly defined via a formal annual Update Report which covers Allocation, Eligibility and Impact Reporting.
• Expenditures & Debt Instruments Definitions: Standard V3.0 provides detailed definitions on which type of expenditures are eligible and an expansion in the list of debt instruments which can be Certified, including loans, sukuk, deposit products and other investments. 

Table 1: Key Features 

Standard V2.1 and transition 

The current Climate Bonds Standard V2.1 as utilised by Issuers & Verifiers will remain operative for new Certifications in parallel with Standard V3.0 till June 30, 2020 subject to Verifier and market readiness. Existing Certified transactions can continue to use V2.1 or can choose to adopt Standard V3.0 for their ongoing reporting. 

We welcome input from stakeholders on Standard V3.0 and we look forward to developing an enhanced V3.1 in the future. 

Understanding Certification

The Climate Bonds Certification framework has been designed to work in parallel with the normal bond issuance process. It has 2 phases, Pre-Issuance and Post-Issuance Certification. Certification of a Climate Bond at the Pre-Issuance phase enables the issuer and underwriters to market the bond as a Certified Climate Bond. In the Post-Issuance phase further assurance activities must be undertaken to maintain the Certification.

Figure 1. 

$100bn in cumulative Certifications

The volume of Certified transactions has exceeded a cumulative total of USD 100bn and is growing with issuance from over 30 countries in 21 currencies. Sovereign Issuers include the Netherlands (EUR5.98bn), Chile’s Sovereign bonds (EUR861m & USD1.418bn) and Nigeria.  

The Certified Bonds Database with all issuers can be found here. 

The last word

Standard V3.0 aims to support the rapid expansion of green investment and accelerate the mainstreaming of green finance via a simple label which investors can trust in a dynamically changing market.

Its been a long journey from the 2011 launch of the original 'bare bones' Standard, which was more concept than finished construction.The first Working Group was established in 2012, the NAB AUD300m Certified green bond of 2014 was pivotal (a multiple world first from Australia), all the way to today where giant urban rail operators and water utilities are mainstreaming repeat green issuance via Programmatic Certification.  

Sean Kidney’s assessment paints the picture at the end of 2019: 

“The Climate Bonds Standard now underpins Certification of over USD100 billion worth of green bonds and debt products around the world and is growing.”

“Climate Bonds Certification has emerged as a universal adaptor for issuers and investors in both developed and emerging economies.”

“It’s a simple pathway to best practice that provides recognition and compatibility in multiple jurisdictions.”

“Standard V3.0 strengthens disclosure & green definitions and is another step in the maturation of the green bond market that’s growing towards a trillion dollars in annual issuance.”

‘Till next time,

Climate Bonds.

Green Transition – Opportunity of the Decade – Climate Bonds' focus for Conference2020

Over the last decade, Climate Bonds has worked to mobilise the largest capital market of all, the $100 trillion bond market for climate change solutions.

Much has been achieved in our first ten years. Yet the challenge remains undiminished and the climate emergency grows.

At Conference2020 the Climate Bonds vision for the next ten years - the Transition Decade - will be opened for discussion and debate amongst investors and policymakers looking to 2030.

Will you join us?

Conference2020 takes May 5-7^th in London.

A mix of training, plenaries, forums and specialised workshops.

More information and registration is here.

Green Bond Awards

2020 will also mark the fifth occasion of our Green Bond Awards.

Inaugurated in 2016, the Climate Bonds awards are universally recognised as the most prestigious international recognition for leadership and innovation in green finance market development.

Since 2016, 132 organisations and individuals have been recognised for their pioneering contributions to green finance.

The Last Word 2020-2030

2020 will be Climate Bonds’ 10^th Anniversary!

While we’ll be marking how far green finance has progressed in the last ten years, our gaze is firmly fixed towards 2030. 

Conference2020 on May 5-7^th is a must-attend event for anyone looking to play a role in shaping the global green finance agenda into the new decade. 

You can find more information, initial agenda details, registration and event packages here.

See you in May,

'Till next time

Climate Bonds

Look for the latest conference details on our Twitter and LinkedIn. 

Milestones aplenty in 2019: More issuers, more jurisdictions: US, China, France lead national rankings: Europe heads regional market momentum and France heads Europe

At a Glance- The 2019 numbers

• New global record: USD257.7bn total green bond issuance*
• 51% growth on 2018 annual figure 
• 1788 green bonds from 496 issuers 
• 250 new issuers, contributing USD67.8bn to the annual total 
• 51 jurisdictions, of which 8 are new
• Green loans at 4% & growing
• Single largest green bond via Dutch State Treasury Agency (DSTA) Climate Bonds Certified at EUR5.99bn (USD6.66bn)
• Climate Bonds Certifications pass the cumulative USD100bn milestone 

Our Green Bonds Market Summary 2019 Global green bond and green loan issuance reached an adjusted USD257.7bn in 2019, marking a new global record. The total is up by 51% on the final 2018 figure of USD170.6bn. Of the total, USD10bn (4%) are green loans. 

The 2019 volume was primarily driven by the wider European market, which accounted for 45% of global issuance. 

Asia-Pacific and North American markets followed at 25% and 23%, respectively. 

In 2019, the total amount of green bonds issued in Europe increased by 74% (or USD49.5bn) year-on-year, reaching a total of USD116.7bn.

Vive la USA, China & …. France!   

The USA, China and France topped the country rankings once again. Together they accounted for 44% of global issuance in 2019. US issuers contributed USD51.3bn to the total, Chinese and French counterparts brought USD31.3bn[1] and USD30.1bn to market respectively. 

Latest in GIIO series looks in depth at one of SE Asia’s fastest growing nations

Aim to build engagement on green finance with project owners, developers & investors 

Climate Bonds has released the Green Infrastructure Investment Opportunities - Vietnam (Vietnam GIIO) report, assessing the state of the market to finance green infrastructure projects in Vietnam. Produced with the support of the European Climate Foundation and available in English and Vietnamese, the report identifies trends and opportunities, analyses major green projects and outlines actions to grow green finance and investment. 

Sixteen (16) green projects in renewable energy, low carbon transport, water infrastructure and waste management are showcased and a sample pipeline of approximately forty (40) projects in low carbon transport, renewable energy, sustainable water & waste management is identified. 

Vietnam GIIO has been prepared to help meet the growing demand for green investment opportunities and to support the country’s transition to a low carbon economy. It aims to facilitate greater engagement on this topic between project owners, developers & institutional investors and stimulate financing and development of climate resilient and adaptative infrastructure that will assist Vietnam meet its economic and climate goals. 

Sustainable Growth and Green Infrastructure

In Vietnam, approximately USD31 billion is needed in 2020 to shift the economy to a more sustainable path and achieve national emissions reduction targets. Most of this potential relates to the areas of renewable energy and green infrastructure, including public transport, water and waste management.

The report notes that compared to neighbouring countries, Vietnam has one of the highest percentages of infrastructure spending; however, public funding alone will not be enough to fund this transition. The Government is turning towards private sector led investment. Improving planning capacity and regulatory structures will assist attract private investment. Green finance presents an opportunity for infrastructure funding and developing a robust pipeline of green projects that can attract green capital is a priority. 

Key recommendations: 

• The issuance of a sovereign green bond by the Vietnamese government as a way of signalling the country's commitment to a green finance agenda.
• Integration of climate resilience criteria in the development of infrastructure projects in different spheres to minimise future risks to these assets. Integration within the planning process would accelerate the consolidation of a nationally sustainable infrastructure portfolio.
• Adoption of project design tools for sustainable projects of public infrastructure through good governance and service platforms.
• Adjustment of regulatory requirements, including by promoting a standardized green certification for project financing and integrating climate criteria.

Kristiane Davidson, Head of Green Infrastructure Investment, Climate Bonds Initiative:

“The report can act as a guide for investors, MDBs and policy makers and proposes important adjustments and regulatory recommendations to government."

"Integrating mitigation and climate resilience criteria into conventional infrastructure planning provides Vietnam with a concrete opportunity to access new capital flows seeking green initiatives, especially in the international market. Investor demand for green infrastructure projects is growing, as climate, ESG and sustainability considerations increase.”  

Sean Kidney, Chief Executive Officer, Climate Bonds Initiative:

"Climate impacts, resilience and adaptation measures are now inextricably linked to infrastructure planning and development including national economic development and the SDGs. This critical relationship is increasingly being understood by governments and global investors throughout Asia.”

“The Vietnam GIIO report identifies multiple, investable projects essential to mitigating climate risk and supporting sustainable economic growth. It provides a new platform for engagement between governments, development banks and global investors around green finance to fund new infrastructure.”

GIIO Vietnam is available for download here .

Báo cáo GIIO Việt Nam có thể được tải tại đây

A video recording of the GIIO Launch Webinar is available on  the Climate Bonds Webinar Page.  Or download from our Podcast Page. 

Climate Bonds công bố Báo cáo Cơ hội Đầu tư vào Cơ sở hạ tầng xanh Việt Nam

Với trọng tâm là tài trợ vốn và đầu tư vào Cơ sở hạ tầng xanh

Climate Bonds Initiative đã công bố Báo cáo Cơ hội đầu tư vào Cơ sở hạ tầng xanh - Việt Nam (GIIO Việt Nam), đánh giá tình trạng của thị trường để tài trợ vốn cho các dự án Cơ sở hạ tầng xanh tại Việt Nam. Báo cáo được hoàn thành với sự hỗ trợ của Quỹ khí hậu châu Âu (European Climate Foundation), bằng cả tiếng Anh và tiếng Việt, trong đó xác định xu hướng và cơ hội, phân tích các dự án xanh lớn và phác thảo các hành động để thúc đẩy phát triển tài chính và đầu tư xanh.

Báo cáo trình bày cụ thể mười sáu (16) dự án xanh về năng lượng tái tạo, vận tải phát thải các-bon thấp, cơ sở hạ tầng nước và quản lý chất thải, đồng thời liệt kê danh sách với khoảng bốn mươi (40) dự án về vận tải các-bon thấp, năng lượng tái tạo, quản lý chất thải và nước bền vững ở Việt Nam.

GIIO Việt Nam được lập với mục đích đáp ứng nhu cầu ngày càng tăng về cơ hội đầu tư xanh và hỗ trợ Việt Nam chuyển đổi sang nền kinh tế các-bon thấp. Báo cáo hướng tới mục tiêu tạo điều kiện để các chủ dự án, các nhà phát triển và các nhà đầu tư tổ chức tham gia sâu rộng hơn nữa vào chủ đề đầu tư xanh và thúc đẩy hoạt động tài trợ vốn cũng như sự phát triển các dự án cơ sở hạ tầng bền vững và thích ứng với biến đổi khí hậu; từ đó hỗ trợ Việt Nam đạt được các mục tiêu về kinh tế và khí hậu

Phát triển bền vững và Cơ sở hạ tầng xanh

Tính đến năm 2020, Việt Nam cần khoảng 31 tỷ đô la Mỹ để chuyển đổi nền kinh tế theo hướng phát triển bền vững và để đạt được các mục tiêu quốc gia về giảm phát thải. Tiềm năng phát triển hầu hết nằm ở các lĩnh vực như năng lượng tái tạo và cơ sở hạ tầng xanh, bao gồm vận tải công cộng, quản lý nước và chất thải.

Báo cáo cũng chỉ ra, so với các nước láng riềng trong khu vực, Việt Nam hiện là một trong các quốc gia có tỷ lệ chi tiêu công phân bổ cho phát triển cơ sở hạ tầng cao nhất. Tuy nhiên, chỉ riêng nguồn tài trợ công sẽ không đủ để tài trợ vốn cho quá trình chuyển đổi sang nền kinh thế các-bon thấp. Chính phủ Việt Nam đang chuyển sang hướng phát triển đầu tư từ khu vực tư nhân. Cải thiện năng lực lập kế hoạch và hệ thống pháp luật sẽ giúp thu hút nguồn đầu tư tư nhân. Tài chính xanh mang đến cơ hội huy động vốn cho các dự án đầu tư xanh và phát triển hơn nữa các dự án xanh với ưu tiên hàng đầu là thu hút đầu nguồn vốn xanh.

Các khuyến nghị chính là: 

• Việc Chính phủ Việt Nam phát hành trái phiếu chính quyền địa phương xanh là một tín hiệu tốt thể hiện cam kết của đất nước đối với các mục tiêu phát triển tài chính xanh.
• Tích hợp các tiêu chí bền vững với khí hậu trong việc phát triển các dự án cơ sở hạ tầng trong các lĩnh vực khác nhau để giảm thiểu rủi ro trong tương lai đối với các tài sản này. Tích hợp trong quy trình lập kế hoạch sẽ đẩy nhanh việc hợp nhất danh mục cơ sở hạ tầng bền vững trên toàn quốc
• Áp dụng các công cụ thiết kế dự án cho các dự án cơ sở hạ tầng công cộng bền vững thông qua nền tảng quản trị và dịch vụ tốt.
• Điều chỉnh các yêu cầu pháp lý, bao gồm bằng cách thúc đẩy việc cấp chứng nhận xanh chuẩn hóa để tài trợ vốn cho dự án và tích hợp các tiêu chí khí hậu.

Kristiane Davidson, Trưởng bộ phận Đầu tư Cơ sở Hạ tầng Xanh, Climate Bonds Initiative:

“Báo cáo này đóng vai trò định hướng cho các nhà đầu tư, các ngân hàng phát triển đa phương (MDBs) và các nhà hoạch định chính sách và đề xuất các điều chỉnh cũng như khuyến nghị quan trọng giành cho Chính phủ”

“Việc tích hợp các tiêu chí giảm thiểu tác động xấu và tăng khả năng phục hồi từ biến đổi khí hậu vào quy hoạch cơ sở hạ tầng thông thường cung cấp cho Việt Nam cơ hội cụ thể để tiếp cận các dòng vốn mới hướng tới các sáng kiến xanh, đặc biệt là trên thị trường quốc tế. Nhu cầu của nhà đầu tư đối với các dự án cơ sở hạ tầng xanh đang tăng lên khi công chúng ngày càng quan tâm hơn tới khí hậu, các tiêu chí về Môi trường, xã hội và quản trị (ESG) và phát triển bền vững”

Sean Kidney, Giám đốc điều hành, Climate Bonds Initiative:

Các tác động của khí hậu, khả năng phục hồi và các biện pháp thích ứng hiện liên quan chặt chẽ với quy hoạch và phát triển cơ sở hạ tầng bao gồm phát triển kinh tế quốc gia và tính đến các mục tiêu phát triển bền vững (SDGs). Chính phủ và các nhà đầu tư quốc tế trên khắp Đông Nam Á đã nhận thức được mối quan hệ quan trọng này.

 “Báo cáo GIIO Việt Nam xác định nhiều dự án có thể đầu tư cần thiết để giảm thiểu rủi ro khí hậu và hỗ trợ tăng trưởng kinh tế bền vững. Báo cáo cũng cung cấp một kênh mới kết nối các chính phủ, ngân hàng phát triển và các nhà đầu tư toàn cầu xung quanh tài chính xanh để tài trợ cho cơ sở hạ tầng mới”

Báo cáo GIIO Việt Nam có thể được tải tại đây
Bản thu âm của Hội thảo trực tuyến công bố Báo cáo GIIO ngày hôm nay có thể được truy cập trên website chính thức của Climate Bonds tại đây

Về Báo cáo Cơ hội Đầu tư và Cơ sở hạ tầng xanh – Việt nam 2019: được phát hành bởi Climate Bonds Initiative dưới sự tài trợ của Quỹ Khí hậu Châu Âu (ECF).

‘Till next time

Climate Bonds 

A closer look at CBAM: Implications should the EU carry through on long-mooted move to level up the low carbon playing field

CBAM is coming? 

The world is “way off track” in dealing with the climate emergency and time is fast running out. To help raise global ambition, the European Union (EU) has a €1tn (£852bn) European Green Deal that aims to make the entire 27-nation bloc[i] carbon neutral by 2050. As part of this, the European Commission (EC) announced a Carbon Border Adjustment Mechanism (CBAM) for selected sectors to be introduced by 2021.

While an important step, until now the concept of a CBAM has been considered cumbersome and controversial. Application must be handled with care. If the measures prove to be protectionist in disguise, the CBAM could inflame a climate trade war, undermining global decarbonisation efforts.

Levelling the carbon playing field 

The CBAM has not been implemented – although California could count – and carries many names, including: a “carbon border tax”, “border tax adjustment”, “border carbon adjustments”, and “carbon border tax”[ii]. 

For the EC, the CBAM would be a levy[iii] on imported goods from countries with weaker climate policies. 

An idea that is conceptually attractive. Beyond preventing “carbon leakage” – when climate action in one country pushes polluting activities elsewhere to avoid strict regulation – it would help domestic industries keep competitive against their foreign competitors. 

The proposal could inspire the EU to join forces with like-minded nations to create “climate clubs”. A fanciful thought but, if large enough, may motivate laggards into faster emissions cuts.

In summary, imports that fail to meet certain environmental standards will be hit with a tariff. Ultimately, the CBAM aspires to build a ‘green’ level playing field. 

Avoiding 'climate protectionism'

“Carbon leakage” occurs in relatively few industries. Carbon intensive and trade exposed (CITE) sectors are most at risk, given the high carbon contents of their products. 

As such, the CBAM will likely be applied to the following sectors: cement, steel, and aluminium, according to a leaked EC document. Currently, these three sectors account for almost 60 percent of industrial emissions under the EU’s Emissions Trading System (ETS). It may even expand to include shipping and aviation. 

Accordingly, foreign companies from the targeted sectors, who wish to sell into the 27-nation bloc, will need to either meet the EU’s environmental standards or be ready to pay the proposed tariff.

In this context, the CBAM sounds like decided trade barriers to push “climate protectionist” behaviour and undermine the multilateral trading system. 

However, if designed correctly, the CBAM could  improve climate conditions without endangering the multilateral trading system. Fortunately, there is already useful work that has identified key features that the CBAM could employ to prevent protectionism. 

Controlling future trade tensions

The CBAM – unless designed to help climate and industry – could fuel another trade war – a recent example being China and the US.

During this year’s World Economic Forum’s in Davos, Ursula von der Leyen, President, European Commission, warned China to price carbon or face tax. Chinese steel imports into Europe would most likely be captured by the CBAM. But according to Zhao Yingmin, China’s vice-minister for the environment, Europe’s proposals would seriously harm international efforts to tackle global warming.

Ruslan Edelgeriev, Vladimir Putin’s climate adviser, urged Russia’s biggest companies to speed up their efforts to go green and prepare for life with the border tax. Currently, Russian exporters enjoy a competitive advantage thanks to the country’s low energy prices. A carbon cost would be a serious change, especially when the EU accounted for 45% of its trade turnover in 2019, according to Rosstat[iv].

The US is also expected to retaliate. Wilbur Ross, US Commerce Secretary, cautioned that Ms. Von der Leyen’s environmental plan could be a new irritant in trade relations with Europe but has not specified any retaliatory measures.

The UK is currently part of EU’s ETS but the government plans to exit the carbon market and implement a domestic carbon market by January 1, 2021. In response, 

The EU has threatened to apply the CBAM against the UK in order to restore a level playing field. Ensuring that the CBAM is not perceived as another form of protectionism is important. 

And aligning with WTO rules

The CBAM must be compatible with World Trade Organisation (WTO) rules. In brief, the CBAM cannot discriminate against any individual trading partner or favour domestically-produced goods over imports. The WTO rules explicitly allow for environmental impacts arising from the production of goods. The first test of how the then newly created WTO would deal with environmental issues came in the 1998 “shrimp-turtle” case[v]. The ruling’s implication was that the CBAM could be levied according to the carbon emissions emitted from producing the good. 

So, as long as the CBAM makes a case in the interest of fair trade and environment, it could be WTO rules compliant.

What about transparency?

Monitoring and reporting need to be consistent and robust – important factors in implementing carbon prices. Even though, it is relatively easy to measure emissions domestically, it is difficult, near impossible, to measure in third countries[vi]. Given an import tariff needs to be true to emissions, verifications and calculations have to be made too.

Five years ago, a scandal saw a high-profile German automaker guilty of manipulating their emissions data. If European manufacturers can falsify their emissions, how can one guarantee that foreign firms will not do the same? 

Going further, in countries where corruption is endemic, would companies disclose the correct carbon emissions emitted? Additional concerns that the EC will need to carefully consider.

A possible solution

The Carbon Border Adjust Mechanism is, seemingly, a politically optimistic approach to green policy. Moreover, there is merit behind trialling the scheme with the highest polluting industries – cement, steel, and aluminium. 

However, the announcement of the CBAM is just that – an announcement. Although other options to carbon pricing exist, the likely success of such a mechanism hinges on two elements.

Firstly, establishing an objective methodology on how the border tariff rate will be calculated. This would soften any doubts regarding the CBAM’s viability. European manufacturers pay a carbon price set by EU’s ETS – currently at its lowest level since mid-2018. Foreign imports are excused from paying this, making their products cheaper. The border tariff rate would make imports from outside EU pay a carbon price. 

This should signal to other countries wanting to sell into the EU to green their production processes. 

Secondly, the scheme should also be flexible, so when other countries impose carbon prices as high as those in Europe or demonstrate lower carbon usage – like sourcing their electricity from renewables, imports from those countries would be exempt. This would incentivise non-EU member countries to prove emitted greenhouse gas emissions. 

The last word 

The EU has acted progressively on climate change over the past two decades. By piloting the EC’s intended commitments, ambitions are being raised to new heights and shown their determination to make Europe the first climate-neutral continent by 2050.

The CBAM, as one EU official said, is “clearly complex – and intellectually and politically challenging.” 

But the direction of travel is clear. 

With a decade left to mitigate against the worst of climate impacts, the EU seems committed to spearhead the global fight against climate change.  

Till next time,

Climate Bonds 

Acknowledgements: Authored by Zach Malik & Abhinaya Chandrasekaran, Climate Bonds Initiative. 

New series of in-depth interviews; Sean Kidney with global sustainability leaders

Tackling the big issues around climate, transition and building a more resilient future

This is the first Webinar in our Leading Climate Ideas series with Sean Kidney interviewing international green finance leader Dr. Ma Jun, on the global shift towards sustainable economies. 

Where to advance in green finance? How can the shift towards low-carbon transition be accelerated? 

Tune in on: 

Wednesday 13th May

15:00 Paris / 14:00 London / 21:00 Beijing / 09:00 New York

Register here.



About Dr. Ma Jun 

He is the Director of the Centre for Finance and Development at Tsinghua University & Chairman of China Green Finance Committee. 

Dr. Ma Jun is also Chair of the Supervision Workstream of the Central Bank & Supervisors Network for Greening the Financial System (NGFS). 

And is also Advisor to the Governor of the Peoples' Bank of China (PBOC). 

He’s a member of the Monetary Policy Committee of the PBOC, Chair of Green Finance Committee of China Society for Finance and Banking and Chair of the Hong Kong Green Finance Association (HKGFA). 

Ma Jun is also Vice President of China International Economic Relations Association and a Member of China Finance 40 Forum.

He previously chaired the G20 Green Finance Study Group (GFSG).

Between 2014 and 2017, he served as the Chief Economist at the PBOC’s Research Bureau and led the national green finance policy framework.

This event will be a unique opportunity to hear directly from one of the world’s leading exponents of green finance and sustainable economic development.

Register here: https://zoom.us/webinar/register/2615887859767/WN_xYJFHrsmTMaQq5BSwGgzvA 

Leading Climate Ideas #2 Tuesday 19th May 

Second in the series has green finance guru Professor Nick Robins from the Grantham Research Institutute at LSE & EU Sustainable Finance TEG member Helena Viñes Fiestas from BNP Paribas AM, in a wide ranging discusssion with Sean Kidney.

Agenda: From Taxonomy to the broader Sustainable Finance Revolution

Tuesday 19th May: 14:00 London / 15:00 Paris / 21:00 Beijing / 09:00 New York

Register here: https://zoom.us/webinar/register/3915892161589/WN_8vSu7NAlTgawft7TN6UihQ​

More in the new #ClimateIdeas series to come in late May/June.

Coming up this Week

Our regular Thursday 'EU Taxonomy Explored - Talk with TEG Experts' webinar looks at Adaptation and Resilience.

Look out for India, ASEAN and Introducción a la taxonomía europea.

'Till next time,

Climate Bonds

Special Webinar: Green ABS in India - Wednesday, 20th May at 4:00pm India (11:30 am London) Registration. 

Small scale projects can build large scale resilience 

India, like so many countries is still in a state of lockdown and only just beginning the first steps in a phased exit. Though it is hard to imagine at the moment, but the Coronavirus pandemic will one day be behind us leaving the world to deal with the impacts.

Afterwards emerging market governments will have fiscally weakened, with limited capacity to fund small-scale projects that urban and rural communities so desperately need to build resilience against climate change and future health challenges.

The small, targeted investments in solar home devices, crop loans, micro-irrigation, solar roofs and batteries that are crucial to urban and rural development, providing much needed light at night, water and food, security and connectivity.

Private capital to provide urban and rural communities resilience

If governments are less able to fund this where will this finance come from? 

Over the next year or two, bank balance sheets will be stretched extending loans to existing customers to finance temporary shortfalls in business revenue and weakened through increased losses from non-performing loans. Low-income households lacking collateral and credit histories have always been underserved by conventional banks. 

The pandemic can potentially exacerbate this situation.

Though in India, Priority Sector Lending regulations mean banks have specific targets to lend to some disadvantaged groups including farmers. This pressure on bank balance sheets could be alleviated if banks refinance their loan portfolio from the debt capital market.    

Challenges of Green Securitisation   

Last year, Climate Bonds Initiative concluded research looking at the opportunities and challenges of Indian financial institutions using green securitisation to refinance their climate-friendly lending portfolios. Securities as an enabler of green asset finance in India analysed the structural, financial and policy issues around securitisation and the potential role of green finance as an enabler to market growth.  

Securitisation using instruments like Asset Backed Securities (ABS) allows small, illiquid loans like mortgages to be pooled and then structured into tranches with different risk characteristics, which can be sold into the debt capital markets to investors with various risk appetites, such as insurance companies, pension funds or mutual funds. 

At the macro level, these transactions contribute to the dissemination of risks across a larger pool of investors, helping to strengthen the financial market making it more resilient. 

DFIs and Philanthropies have a role 

Development agencies and philanthropies with a mission to help finance climate mitigation or development can increase their impact by investing in the riskier part of these transactions (also called “first loss”), allowing other investors to crowd in. In so doing, they can achieve scale and supply green or socially-minded projects with credit-enhancement making the securities more attractive to private capital. 

Globally, securitisation using green ABS accounted for USD20bn of issuance in 2019. This was used for refinancing green mortgages, loans for electric vehicles and other micro-finance loans. But none of India’s USD 10.3 bn green bond issuance has been in green securitised products. Indeed, the use of securitisation changed little 2015. The lack of growth of issuances arose because of worries about the treatment of the income by tax authorities. Once this was clarified there has been significant growth especially in fiscal year 2019 with a doubling of activity.

However, in 2020, the moratorium granted by RBI because of the virus outbreak on loan repayment is again likely to decrease volumes.

Retail transactions of securitisations for fiscal years (INR ‘000 Cr)  

Source: CRISIL estimates

Previous barriers to growth

In our report, we note a number of factors impeding the market: uncertainty about the tax treatment of earnings held by mutual funds, regulations capping the credit rating or type of issuer that pension and insurance funds can invest in and hurdles on foreign investors involved in the ABS.

Financial disputes have been notoriously slow to be resolved in Indian courts, this potentially makes it difficult for investors to recoup money from the Special Purpose Vehicle set-up to ensure securitised assets are held remotely from the bank that originated the loans.

Progressively many of these restrictions have been lifted and India has passed a Commercial Courts Act in 2015 to speed up financial disputes. 

The opportunities of green ABS

Asset-backed securities work best for pools of investments that are homogenous in their risk characteristics, tenor and the regulatory framework. 

We identify several opportunities for greater use of green ABS including loans including

• Mortgages for low-carbon buildings – in India there are INR 300 billion of mortgage-backed securities issued annually. India already has building certification schemes that could be assessed to ensure their data collection is rigorous; 

• Hybrid and electric vehicles like cars, rickshaws – starting from a narrow base the demand for these vehicles grew seven-fold between 2015 and 2017.

• Agricultural loans – Indian banks, Rural Regional Banks and rural co-ops lend to farmers for crop loans and to cover capital projects like micro-irrigation, solar pumps.

• Solar home systems/ appliances – India has a target for installing 175 GW of renewable energy by 2022 and a sub-target of 40 GW for solar rooftops.

• Green Infrastructure – loans to various types of green infrastructure can be pooled together, sometimes across multiple lenders, in order to free up some capital for these lenders to provide additional financing. 

Using securitisation to increase investment in small scale projects

Providing small-scale borrowers for green projects cheap and abundant finance is a huge challenge for India’s development. Where projects are relatively homogenous and the risks and rewards well understood by investors and the regulatory framework conducive green, ABS can be a good financial tool. 

But additional reforms are needed to increase its use in India and Securities as an enabler of green asset finance in India makes some recommendations. 

• Increasing the origination of green loans: A number of reforms could be made to increase the underlying amount of green lending taking place. This could include extending the scope of Priority Sector Lending to embrace all green assets identified in the green taxonomy, and Indian states creating warehousing facilities to pool together projects like the solar-roof top programme​​
• Improving returns on green loans: Government institutions like IREDA or NABARD could provide partial credit guarantees.​
• Attract multilateral agencies to provide “first-loss” concessionary capital: philanthropies and development institutions can offer guarantees at the first-loss level in order to facilitate the formation of portfolios that can be offered, for their mezzanine and senior risk layers, to institutional investors​
• Increasing the demand for green ABS: One simple reform would be to standardise loan documents to make it easier to pool loans. Some of the remaining restrictions on Indian pension and insurance funds on credit quality could be relaxed and just as importantly training provided to staff to help them assess asset classes they might be unfamiliar with. 

The Last Word 

India has the opportunity to invest in hundreds of thousands of small, dispersed projects: roof-top solar and other renewables, energy-efficient buildings, sustainable agricultural practices and mass transportation systems to allow the country’s enviable rates of economic growth reach deep into its masses. 

Tackling policies for recovery that lean towards transition and sustainable development. 

The nation has the opportunity as an emerging market to create financial mobility towards green investing. Increasing both demand for and supply of green ABS is one of the areas deserving further support. 

Register for our Webinar: Unlocking Millions of Small-scale Investment Opportunities – Green ABS in India on Wednesday, 20th May at 4:00 pm India (11:30 am London) as expert speakers discuss how ABS can help finance green investment projects, build resilience and support sustainable development. 

'Till next time,

Climate Bonds

More information on all Climate Bonds Webinars and links to recordings of previous events can be found here. 

There’s a topic for everyone as we showcase six (6) webinars this week.

We're launching our first 'India Edition' with a detailed look at green ABS, there's EU Taxonomy, infrastructure financing in ASEAN & the first cut of webinars coming in June

One for Tuesday 

Webinar #2 in our new Climate Ideas series:

Tuesday: 19/05, 15:00 Paris / 14:00 London / 09:00 New York

Three for Wednesday 

Launch of the India Edition series – Expert speaker panel:

Wednesday: 20/05, 16:00 New Delhi / 11:30 London 

Another in the ongoing Talks with TEG Experts series, (Held with support from the ECF)  

Wednesday: 20/05, 15:00 Paris / 14:00 London / 09:00 New York

Special Spanish language event, supported by Real Instituto Elcano:

Wednesday: 20/05, 16:30 Madrid / 15:30 London

Two for Thursday

Next in the Talks with TEG Experts series- Transport in the spotlight:

Thursday: 21/05, 15:00 Paris / 14:00 London

ASEAN regional series continues:

Thursday: 21/05, 15:00 Bangkok / 16:00 Singapore/ 16:00 Kuala Lumpur/ 09:00 London 

Next Week 

Wednesday: 27/05, 15:00 Bangkok /16:00 Singapore/ 16:00 Kuala Lumpur/ 09:00 London 

Financing Options for Sustainable Transport Infrastructure in Cities
Registration link: https://zoom.us/webinar/register/4215898111403/WN_JQymI25iRQypNpDbOWebIA

Can’t get enough Taxonomy? There’s more:

Thursday: 28/05, 15:00 Paris / 14:00 London 

EU Taxonomy Explored: Talks with TEG Experts: Usability
Registration link: https://zoom.us/webinar/register/WN_jC0uR0SQSJiq2Rq3YqqbEA
 

Early look at June 

ASEAN series for June looks first at the built environment & later, green investors:

Wednesday: 03/06, 15:00 Bangkok / 16:00 Singapore/ 16:00 Kuala Lumpur/ 09:00 London 

Financing Options for Sustainable Buildings in Cities

Registration Link https://zoom.us/webinar/register/2015898112015/WN_ndbtJX88SNqdSSCS7guVRg

Thursday: 18/06, 15:00 Bangkok / 16:00 Singapore/ 16:00 Kuala Lumpur/ 09:00 London 

ASEAN Green Bond Investors: Who are they?

Registration Link https://zoom.us/webinar/register/3215898114238/WN_qpeaXI55RBi5Kg_blw9gLA

The Last Word – And its Webinars! Webinars! Webinars!

There’s more to come into June including additional 'India Edition' events, China report launch and a new pipeline from LAC with green infrastructure and sustainable agriculture high on the list of topics.

Look for all the latest on the Program visit our Webinar web page or via Twitter and LinkedIn. 

Missed an event?

Recordings and Slides of previous webinars are also available on the page.

'Till next time,

Climate Bonds

Acknowledgement: The EU Taxonomy Explored-Talk with TEG Experts webinar series is kindly supported by the European Climate Foundation (ECF).

Invitation: Flagship Event: China Green Bond Market 2019 Research Report: Monday 29th June.

Climate Bonds Initiative, China Central Depository & Clearing Research Centre & HSBC invite you to the Online Launch via Webinar of the "China Green Bond Market 2019" Research Report. 

This is the fourth in an annual China series from Climate Bonds. 

The Launch Webinar will provide insights on key trends & developments in the China green finance market focusing on green bond issuance, policy & wider market growth. 

Outlook for 2020s including key policy recommendations for supporting the development of the China green bond market, will be discussed, as well as increasing financing for the country’s transition to a low-carbon & sustainable economy.

"China Green Bond Market 2019" Research Report is produced in association with China Central Depository & Clearing Research Centre & supported by HSBC.

Webinar Launch: China Green Bond Market 2019 Research Report

Monday 29^th June

17:00 Hong Kong / 17:00 Beijing / 17:00 Singapore / 11:00 Paris / 10:00 London

Via Zoom

Register here via Zoom

We hope you can participate in the launch of this major report & look forward to your presence. 

'Til Next Time,

Climate Bonds 

First phase will focus on railways: Expectation is that assets are already Certified at the time of auction

Initial Focus on Rail 

The Brazilian Ministry of Infrastructure has announced plans to structure the first program in Latin America to fund infrastructure projects with the issuance of Climate Bonds Certified green bonds. 

The initial stage of the program will focus on three railway networks, with over USD2.91bn of investment potential from Fiol (West-East Integration Railway), Ferrogrão & Central-West Integration Railway (Fico). 

The expectation is that at the time of the auctions the rail assets will have already obtained Certification against the Climate Bonds Standard.

The June announcement by Tarcísio Gomes de Freitas, Minister of Infrastructure, marks an important step towards decarbonizing Brazil’s logistics sector, which is currently heavily dependent on roads and diesel-based truck transportation. 

The rail program will also contribute to increasing efficiency and resilience in Brazilian infrastructure and will be directed mainly towards the transportation of agricultural produce and grains. 

Climate Bonds is also working with the Ministry to integrate climate risk and impacts into infrastructure planning to reduce and better manage the exposure of these assets to the worst impacts of climate change.

  

Tarcísio Gomes de Freitas, Minister of Infrastructure

“A green bond program provides successive issuances for certain types of assets. It is the consolidation of a green pipeline in the infrastructure sector. No project in the transport sector has seen this sort of issuance here in Brazil so far. The time has come now."

Thatyanne Gasparotto, Head of Latin America, Climate Bonds Initiative:

“The Climate Bonds Initiative congratulates the Brazilian Ministry of Infrastructure for announcing the structuring of one of the first green bond programs in Latin America. The consolidation of a green portfolio will be an important step towards the implementation of the program and we, at Climate Bonds, look forward to this moment."

The Last Word - More to come 

Cumulative global green bond market has reached more than USD863.3bn. In 2019 green bonds/loans reached a total of USD258bn. In Brazil,cumulative issuance stands at USD5.97bn as of 30^th June.

In September 2019 the Brazilian Ministry of Agriculture signed a Memorandum of Understanding (MoU) with the Climate Bonds Initiative. The partnership aims to identify green and sustainable opportunities. 

There’s more green finance progress to come from Brazil, on rail, infrastructure and agriculture.

We’ll be keeping you keep you informed over the next few weeks. 

‘Till next time,

Climate Bonds

New appointment strengthens advisor ranks as Climate Bonds looks to accelerate global green investment & climate transition  

With over 30 years of global experience in climate change strategy & sustainability in banking & other sectors, senior Indian business leader Namita Vikas is welcome addition to Climate Bonds in the role of Senior Advisor.

Over her eight years as a senior executive of Yes Bank, a high profile Indian private bank, Namita launched the country’s first ever Green Bond & developed several green & sustainable wholesale & retail financial products, raising over USD 1 billion in capital & credit lines towards mainstream green investment & finance.

She previously served in management positions at Marico, Microsoft & the Confederation of Indian Industry. She founded auctusESG LLP in 2020 as an advisory firm to enable ESG risk management, climate & SDG finance.

At Climate Bonds Namita will support outreach to global Development Finance Institutions (DFI) & Indian corporates.

A global leader 

Globally recognised as leader in sustainability & finance Namita was ranked as one of the “Leading Women in Business Sustainability” by the World Business Council for Sustainable Development (WBCSD) in 2017 & was also named “Sustainability Leader of the Year” by Ethical Corporation in 2017. 

In 2018, Namita was featured as one of “Asia’s Top Sustainability Superwomen” by CSRWorks International. In 2019, she was recognised as one of “India’s Top 100 Women in Finance” by Association of International Wealth Management of India & she regularly features on Asian & global lists of leading women in renewable energy & green finance.

Namita is also a prominent voice at influential national and international platforms including United Nations, Economists Ocean Summit & G20. She has served as the Chairperson of UN Natural Capital Finance Alliance & member of Global Steering Committee of UNEP FI. As Yes Bank Senior Group - President she was a founding member of the UN Principles of Responsible Banking.

Namita has served on the International Capital Market Association’s (ICMA) Green Bonds Executive Committee & on advisory councils/boards of Black Jaguar Foundation (Brazil), We Mean Business, (a global non-profit coalition working towards climate action) & the Bureau of Indian Standards.

An alumna of Columbia Business School, Mumbai University, Svenska Institute Sweden, THNK School of Creative Leadership, Netherlands.

A Welcome from Sean Kidney

“Namita has been a positive force for sustainable & green investment & brings a global perspective, a depth of experience & drive to our ranks of advisors. A warmest of welcomes to Climate Bonds.” 

For more information contact Sean.Kidney@climatebonds.net.

“Prediction is difficult, especially about the future,” quipped Niels Bohr. 

He might have added ‘and particularly about future climate change’. 

Last month, the greening central banks network – the NGFS – published two reports to help its membership work with banks and insurance companies to develop coherent and standardised projections to help understand our exposure to climate risks. They were amongst a string of 2020 reports published by the NGFS focusing on climate impacts to the financial system.  

The first publication NGFS Climate Scenarios for central banks and supervisors provides three representative scenarios: 

• Orderly transition’
• ‘Disorderly transition’ and;
• ‘Hot house world’

The three scenarios combine projected physical climate change (rainfall, temperature) and economic policies variables (like carbon taxes, energy efficiency) stretching up to 100 years into the future in 11 regions. 

These were developed by prominent climate scientists and economic modellers whose work is used by IPCC. As well as the scenarios, in the second report the NGFS’s Guide for Supervisors publication suggests a step by step process for bringing central banks and the financial institutions they supervise on the journey to include climate risks in their decision processes.

The need for speed 

The scenarios feature carbon prices of $100/tCO₂ by 2030 for an orderly transition and necessitate a carbon price of between $300/$700/tCO₂ by 2050 in an orderly/disorderly world. 

As a reality check, the current carbon price within Europe (with the highest carbon price in the world) is just $25/tCO₂. NGFS is asking financial institutions to contemplate the impacts on their balance sheets of coal and gas being pretty much priced out within just ten years and a concomitant investment in clean technologies of $70 trillion in the next thirty years. 

The hot house world 

In the ‘hot house world’ scenario instead of carbon pricing successfully reining in emissions we are left with global temperature rises to 3.5°C by the end of the century, creating climate chaos across three generations.

The two transition scenarios manage to hold temperature rise to less than 2°C with only a limited short-term GDP cost. In these scenarios, there are still significant changes in climate: a rise of 27% in North India and a fall of -30% in Southern Europe for instance.

For real numbers-nerds, detailed data for each of the scenarios is also available.

As we are so tragically witnessing with the torrential rainfall along the Yangtze river basin, there are few threats to financial stability. In turn, these give rise to loss of life, displacement of people, economic volatility, destruction of infrastructure, environmental agrcultural degradation. 

Sadly as Bank of England analysts observe, banks’ current risk models are not incorporating observed climate risks into their pricing mortgage interest in flood prone areas. This is one of many examples where risks, both imediate and structural are yet to be incorporated into economic policy and investment patterns. It is also important that banks and insurers nudge business’ and people’s behaviour, so they invest and adjust their lifestyles to reduce their exposure to climate risks.

Source: NGFS -NGFS Climate Scenarios for central banks and supervisors

The evolution of stress tests 

After the Global Financial Crisis, we increasingly used stress tests to ensure banks were capitalised to withstand plausible future economic shocks.

We now have to develop climate stress tests to ensure banks and the insurance companies are playing their part to shift capital from climate risky investment to climate saving investments. 

In the UK, the Prudential Regulation Authority (PRA) has asked banks and insurers to undertake just such a climate stress test. In Malaysia, the Bank Negara Malaysia (BNM) has developed a principles based taxonomy to help banks distinguish between green and brown lending.

Learn more at the Webinar 

Climate Bonds would like to invite you to a webinar with two leading central bankers, NGFS representatives, Sarah Breeden from UK PRA (Bank of England) and Jessica Chew from the Bank Negara Malaysia (Malysia Central Bank) discussing institutions efforts on this journey.

Thursday 23^rd July 16:30 Kuala Lumpur, 10:30 Paris, 09:30 London

Register here. 

‘Till next time, 

Climate Bonds 

New Trustee to Strengthen Finance and Risk Management

Simon currently leads the Oliver Wyman Forum Climate & Sustainability Initiative and serves clients with a particular focus on developing climate risk management capabilities within financial services. 

Previous Roles

Previous roles have included heading the EMEA Finance & Risk Management practice, being a member of the Financial Services Global Management Committee and leading the Social Impact practice-which provides advice and consultancy to third sector organisations.

Simon holds a BEng (Hons) in Electronic Engineering from the University of Southampton and a DPhil in Robotics and statistical estimation techniques from the University of Oxford.

Speaking of his new role, Simon said: 

"The growth of the global green bonds market owes a lot to the work Climate Bonds has been doing. We have a lot to do in a short amount of time if we are to meet the goals of the Paris Climate Agreement; I am looking forward to supporting Climate Bonds in its ground-breaking work on green finance taxonomies, green banking and transition finance.”

Other Climate Bonds Trustees are Nicholas Silver, Dr. Karl Mallon, Professor Cynthia Williams, Bryan Martel and recently appointed Paul Bodnar.

Welcome! 

'Till next time,

Climate Bonds 

Latest appointment to Climate Bonds Advisory Panel

Dr. Rathin Roy has for the past 7 years been the CEO of the National Institute of Public Finance and Policy (NIPFP) in New Delhi and served as a member of Prime Minister Modi's Economic Advisory Council.

From September 1st he will be Managing Director of the Overseas Development Institute (ODI), in London.

Dr. Roy will provide input into Climate Bonds thinking on the development of sustainable capital markets.

His policy interests and research have mainly focused on fiscal and macroeconomic issues pertinent to human development in developing and emerging economies. 

He has previously worked as an Economic Diplomat and Policy Advisor at the United Nations Development Programme (UNDP), with postings in London, New York, Kathmandu and Brasilia. He has also served as an Economic Adviser with the Thirteenth Finance Commission, Government of India.

Dr. Roy holds a PhD and an MPhil in Economics from the University of Cambridge, an MA in Economics from the Jawaharlal Nehru University and BA (Hons) in Economics from St. Stephen’s College, University of Delhi. He has taught at the Universities of Manchester and London.

Speaking of his new appointment, Dr. Roy said:

"COVID is having a devastating effect on emerging market economies. As we rebuild we must think about doing so in a way that delivers stronger and more sustainable economies. Green bonds can help overcome the resource constraint this transition faces."

Climate Bonds CEO, Sean Kidney said:

"Rathin Roy is India's sharpest economist and a global leader in economic policy formulation. We are extraordinarily privileged to be able to draw on his insights."

Welcome!

‘Till next time

Climate Bonds