$200 billion marks strong best-practice platform as Climate Bonds Standard set to expand reach to heavy industry
Cumulative emissions under the Climate Bonds Standard surpassed $200 billion at the end of 2021, setting a new milestone for international best practice in green investing.
Certified green bonds, loans, sukuk (and other debt securities such as green deposits, leases, commercial paper and repos) have now been issued by over 220 issuers from 40 countries, helping to establish green market investment standards and definitions harmonized across multiple jurisdictions in both developed and emerging economies.
This latest step demonstrates that the market appetite for credible and robust science-based green issues remains strong.
High emitting sectors in 2022 – Chemicals, Cement, Steel
Standards for high-emitting sectors are currently being developed and should be published this year. Core criteria for chemicals, steel and cement will be reviewed by the Climate Bonds Standards Board before being subject to public and industry consultation throughout the year. The consultation on basic chemicals is expected to open in February.
Entity Level Certification in Chemicals and Cement
The commodity chemicals and cement industry will be the first to see the criteria that can be used to assess both Product Use Instruments (UoPs) and, significantly, entity-level instruments. . This will allow the standard to encompass sustainability-linked bonds (SLBs) and sustainability-linked loans (SLLs) – a huge step up in certification options open to issuers.
2021 saw a total of $53.9 billion in certifications awarded under the Climate Bonds Standard. French rail operator Société du Grand Paris (SGP) was the largest certified issuer of bonds in 2021 with USD 7.62 billion in certified green issues and is the largest cumulative certified issuer with USD 24.98 billion in multiple obligations.
The Republic of Chile issued the country’s first sovereign green bond (and the 7th certified sovereign issue to date) in early 2021, with its placements of €400 million and $750 million (total of €1.26 billion). dollars eq.) whose proceeds are allocated to the low-carbon building and transportation sectors.
In Australia, the Queensland Treasury Corporation (QTC) has issued green bonds for a total of AUD 3 billion (USD 2.21 billion eqv.) to fund low-carbon transport infrastructure across the state. QTC’s ongoing issuance of green bonds under the Climate Bonds Standard has benefited from programmatic certification this year.
Elsewhere, Oberlin College has issued a Certified Climate Bond as part of its strategy to achieve campus carbon neutrality by 2025, following an issuance by fellow US educational institution, the Stanford University, issued in April. We anticipate that educational institutions will increasingly embrace green finance as part of a growing trend over the next few years.
Chinese banking certifications
China produced several important certifications in 2021, with major banks continuing their previous practice to issue several green bonds against the Climate Bonds Standard.
The state-run China Development Bank has raised more than 40 billion RMB ($6 billion eqv.) on three issues used for ecological protection and green development along China’s Yellow River Basin.
The world’s largest bank, Industrial and Commercial Bank of China (ICBC) has returned to the market with another £2.34 billion ($3.23 billion eqv.) certified bond, with use of the proceeds dedicated to low carbon transport, marine, solar energy and renewable wind energy.
5 new sectoral criteria launched in 2021
2021 has seen an extension of the scope of the Climate Bonds standard, allowing the certification to verify best practice in climate investing in other industry sectors.
Certifications have been granted for green investments in 5 new sectoral criteria in 2021: networks and storage, hydroelectricity, bioenergy, geothermal energy and maritime transport.
We expect new certifications from major issuers in 2022.
Low-carbon transport had the largest share of certifications with 39% of the total volume. Issues that finance projects in 2 or more sectors represent 28% of the total volume. Energy projects (17% share) and construction projects (14% share) are the third and fourth certified sectors respectively.
The Standard reaches 6 new nations
The expansion of 2021 was also geographical, with Certifications under the Standard in 6 new countries: Costa Rica, Dominican Republic, Finland, Hungary, Malawi, Mauritius.
They join certified broadcasts from Australia, Barbados, Belgium, Brazil, Canada, Chile, China, Colombia, Dubai, France, Germany, Greece, Hong Kong, India, Italy, Ivory Coast, Japan, Kenya, Luxembourg, Mexico, Morocco, Netherlands, New Zealand, Nigeria, Norway, Panama, Peru, Philippines, Poland, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, United Arab Emirates, United Kingdom, United States and Vietnam.
More accredited verifiers
In 2021, other organizations also achieved accredited verifier status under the standard, ensuring bond and loan issuers had multiple verification options through increased geographic coverage and industry criteria.
New auditors included Block C (Brazil), BLX (US), EY Brazil (Brazil), IENE (Greece), Instituto Totum (Brazil) and Kommunal Kredit (Austria), KPMG Hungary (Hungary), Point Advisory (Australia ), PriceWaterhouseCoopers AG (Switzerland), Scope Verifiers (Europe-wide), Sustain Advisory (Italy), Rating and Investment Information, Inc. (R&I) (Japan), Shenzhen CTI International Certification Co. Ltd (CTI certification) ( China).
You can find the full list of accredited verifiers here.
Sean Kidney, CEO, Climate Bonds Initiative:
“The Climate Bonds Standard is the global benchmark for quality in green finance markets. Reaching the $200 billion milestone demonstrates the market’s thirst for credible green financial products based on a solid, science-based emissions reduction foundation that aligns with the goals of the Paris Agreement.
“Certified issuers continue to lead development in their regional and global markets, demonstrating by example best practices in green and sustainable investing.”
“The climate bond standard will expand in 2022 with the addition of new transition criteria creating pathways for change in hard-to-reduce sectors. This represents the continued evolution of labeling financial instruments to encourage large scale investments towards net zero.
The Last Word – Standard Scope to Grow
One of the defining features of the standard’s journey has been its expansion and the breadth of sectors where new certifications have emerged. 2022 will see more additions to the sequel.
2022 will see the deployment of the new transition criteria, marking the next evolution of the climate bond standard and certification system.
Gradually starting in Q1 2022, we will publish the first of new product use-based and entity-level criteria for the basic chemicals sector, with cement and steel to follow later in the year. the year.
Entity-level certification options that encompass the growing SLB and SLL market are a critical next step, allowing carbon-intensive industries greater access to investor capital to support low-emission pathways. carbon in sectors and activities that are difficult and costly to reduce.
Next for January – 2021 review and 2022 forecast
Coming in January, our year-end blog will review a record-breaking 2021 year in GSS Markets and look ahead to 2022. Labeled Markets progress will be assessed in the context of accelerating towards the vital 5 trillion dollars in annual green investments by 2025.
Until next time !