An expert group aims to upgrade standardisation and add certification to climate investments
The climate bonds market marks a rare and welcome success story in the battle against global warming. We have it on good authority – namely, the Intergovernmental Panel on Climate Change – that if the world is to stave off “dangerous climate change”, greenhouse gas emissions need to be 50-70% lower by 2050 than 1990 levels.
Yet, to bring emissions below 20 gigatonnes a year by the middle of the century will require the world to overhaul the current economy. And that will take serious investment. The climate bond (or “green bond”) market represents a spirited attempt to meet that challenge.
Climate bonds are essentially infrastructure bonds tailored specifically to finance climate solutions. According to the Climate Bonds Initiative (CBI), an investor-focused non-profit group, nearly $37bn was issued by 73 bond providers in 2014 – a threefold increase on 2013. The figure could triple again in 2015, the CBI estimates.
Such explosive growth is good news for those trying to fund ambitious low-carbon projects and technologies. But, as with any boom industry, rapid expansion can bring problems. Most of these centre on standardisation and market confidence. What guarantees do bond purchasers have to ensure that what they are purchasing will actually deliver...