Updated Climate Bond Standard V2.0 - now out for public comment!

Posted: Jul 16, 2015

Today, the Climate Bonds Initiative released the draft version 2.0 of the Climate Bonds Standard (we’ve called this version 1.9)  for public consultation. The public consultation period lasts 60 days.

On the advice of investors, bankers and other stakeholders around the world, the updated Climate Bonds Standard has three key improvements:

  1. A more robust assurance framework that is more practical and efficient
  2. Fully integrates the latest version of the Green Bond Principles
  3. Makes annual reporting requirements more explicit.

The investor demand is clear - standards are needed to ensure the credibility of the green bond market. Historically, standards have been key to risk management and building market confidence in other aspects of the bond markets; think standardised financial reporting and auditing processes, for example.  Standardising the green bond market unlocks the potential for institutional investors to increase their stakes in low-carbon and climate resilient investments with confidence.

The Climate Bonds Standard provides green definitions and certification to allow investors, issuers and intermediaries to better assess the environmental integrity of green and climate bonds.  It’s a multi-sector standard covering solar and wind energy investments, related manufacturing and grid, low-carbon buildings, with criteria for transport (rail, vehicles, etc), water, agriculture and other sectors to be released later this year.

Backed by the Climate Bond Standards Board, made up of investor bodies collectively representing $34 trillion of assets under management, and two NGOs, the project involves some 80 organisations and scientists developing clear definitions suitable for capital markets. 

Shaun Tarbuck, CEO of the International Cooperative and Mutual Insurance Federation (ICMIF) said:

"Our industry has committed to defining Smart Risk Investing and to multiplying by 10 their climate related investments by 2020.

“To do that with confidence they need and want credible standards around green bonds and their credentials. That's why we we're so enthusiastic about this important development."

Tallat Hussain, Senior Environmental Counsel at White & Case LLC´s Energy Infrastructure, Project and Asset Finance Group in London says:

“One of the biggest challenges faced by products like climate and green bonds is how to manage the reality that one cannot prescribe “what is green” for every investor."

"Developing standards to guide issuers and inform investors can have a positive effect on the market, managing some of the uncertainty without adding transactional complexity (and cost).” 

The benefits don’t stop there! V2.0 also gives clarification over reporting requirements and how proceeds must be managed.

Clear criteria and guidance will enable issuers to get their internal systems ready and help identify low carbon projects and assets for inclusion. This is important as it removes a lot of the subjectivity in what qualifies.

Abigail Herron, Head of Responsible Investment Engagement at Aviva Investors, said

"Standards are a critical step to scaling the green bond market and delivering on its full potential."

"The second iteration of the Climate Bonds Standard offers investors clear guidance on assessing the green credentials of green bonds and allows for easier comparison and analysis of green investment opportunities. It's a very welcome development”

Alignment with the Green Bond Principles will make it simple for issuers, intermediaries and investors that are already familiar with the Principles’ guidelines on reporting and management of proceeds – those guidelines are now integrated into the Climate Bonds Standard, except the guidelines become requirements.

This transition from guidelines to independently assured criteria is critical for investor confidence, as it means issuers are adhering to clear requirements around use of proceeds, tracking and reporting.

The Standard offers issuers a framework for providing investors with robust information on the climate credentials of their green bonds.  The Standard accommodates all different types of bonds

The updated Climate Bond Standard is now subject to 60 days of public consultation. We welcome your feedback! Have your say by submitting your comments on this page or pop us an email.

After the public consultation period, the Standard will be updated based on the feedback and suggestions received before sending to the Climate Bond Standard Board for approval.

Other key reviewers during the 60 day period include the Climate Bond Assurance Working Group (made up of major audit firms and approved verifiers), the Climate Bond Legal Working Group (made up of global law firms), Industry Working Group (list below) and Climate Bond Partners.

The final Climate Bonds Standard V2.0 will be released in October 2015. Specific guidance will also be released for issuers and verifiers.

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Members of the Climate Bond Standards Board include:

Members of the Industry Working Group include:

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