Climate Bonds Initiative Is Promoting Green Bonds Market Growth
In addition, there has been progress in establishing common, detailed standards aligned with the Green Bond Principles. The Climate Bonds Initiative, an investor-focused nonprofit working to mobilize debt markets for climate change solutions, has developed a green bond project taxonomy, sector-specific technical criteria, and post-issuance requirements, known as the Climate Bonds Standard. Issuers can arrange to have their bonds independently reviewed and certified against this standard, providing additional assurance and transparency to investors.
The green bond market is still young, and it is important that policymakers are not overly prescriptive, as this could increase the cost of issuance and stifle the market’s growth potential. However investors are going to need assurance that a bond issued in compliance with the Green Bond Principles is, in fact, going towards a green project, and green labeling is an excellent way to provide that confidence. Currently and for the foreseeable future, there is room for multiple frameworks to exist until market participants can agree upon a single set of criteria. We believe the work of the Climate Bonds Initiative is vital to establish market-wide standards, which will promote further market growth.
Climate Bonds Initiative
To promote and improve the standardization of the green bonds (GRNB) market, the International Capital Market Association introduced four green bond principles. We looked at them in detail in the previous part of this series. The Climate Bonds Initiative also supports the development of the green bonds market. It’s an international network made up of leading finance and climate experts and some of the world’s largest institutional investors.
The main reason for starting the Climate Bonds Initiative was to streamline the standardization process of the green bonds market by creating an international standards and certification scheme. The scheme is expected to enhance the integrity and liquidity of the green bonds market.
When investing in green bonds, it’s important to make sure that the bonds are being used correctly. The Climate Bonds Initiative seeks to ensure this by green labeling the bonds and engaging third-party verifiers to make sure the bond issuance requirements are met.
In the next part, we’ll take a look at the green bonds market and how it’s diversifying.