The Climate Bonds Initiative is an international investor-focused not-for-profit organization, promoting large-scale investment in the low-carbon economy.
Climate Bonds are asset-backed or ring-fenced bonds issued to raise finance for climate change solutions. Industry sectors encompass everything from clean energy and electricity grids to rail, electric vehicle, bioenergy, forests and water and agricultural adaptation.

Investment in a large-scale low-carbon transition is now a priority for governments and corporations around the world.

According to the International Energy Agency, additional investment into clean energy, low-carbon transport and energy-efficient buildings of $1 trillion a year for the next 40 years is required to shift to a low carbon economy and avoid catastrophic climate change.

While the scale of required climate investment of the coming 40 years is enormous, it will be produce an economic stimulus and will be largely focused in productive assets. The prize is lower energy costs and better living and working environments.

This financing requirement however is beyond the capacity of most governments, especially in an era of fiscal constraint. Investment will have to come from the private sector. The key to unlocking investment lies in wholesale capital markets, especially the $95 trillion bond market.

Many of the world’s large investors are well aware of the macro risks of climate change but translating that awareness into portfolio management is still a challenge. If offered investment-grade opportunities equal to their existing asset allocation requirements, most would choose climate change solutions.

The Climate Bonds Initiatives promotes investment in projects and assets necessary for a rapid transition to a low-carbon economy. Work streams include:

— Market Promotion: Thought leadership and advocacy on how to encourage investment;
— Market Facilitation: Proposals for standards, incentives and governance institutions that will support a rapid scaling up of investment;
— Market Growth: Development of project models to provide risk-adjusted returns in assets such as renewable energy, energy efficiency, forestry, and other climate sectors.

“The World Bank Group is very supportive of the work of the Climate Bonds Initiative; we see it as fundamentally important to the development of green debt capital markets.”
— Rachel Kyte, Vice President, World Bank

“The Climate Bonds Initiative provides a welcome platform to investigate the policy and market framework that will simultaneously raise capital for low carbon solutions and provide attractive risk adjusted returns for investors.”
— Nick Robins, HSBC Climate Change Centre for Excellence

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Work Streams

Market Promotion: Thought leadership and advocacy

- Coalition building
Raising awareness and building support for innovative approaches to tapping debt capital markets for the low carbon economy. Concept development, participation in forums and media campaigns.
- Market Tracker
Sizing the existing and potential market helps investors better understand the opportunity with climate bonds. This project looks at qualifying issuance, mapping growth sectors and informs the creation of climate bonds indices.

Market Facilitation: Standards, incentives and institutions

- Government institutions focused on enabling investment
The Climate Bonds Initiative has been a core member of the TransformUK, a NGO-business coalition which has lobbied successfully to set up an “enabling” Green Investment Bank in the UK. The Initiative has also had input into policy proposals in Australia for a similar facility.
Work is now focusing on efforts to align the lending priorities of existing international financial institutions and state banks to the urgent need to invest in low carbon economic transition.
- Policy risk insurance for renewable energy investors
Policy risk is seen by many investors as the biggest risk they face. Insurance against policy changes that result in a material loss to sustainable energy projects frees up investment and enhances private sector capital flows into the sector.
- Improving public finance leverage
Rather than direct funding, governments and international climate funds can achieve more by using public sector funds to leverage private sector debt. This project explores how best to do this, including how to evaluate existing mechanisms.
- Covered Climate Bonds as a new investment instrument
A project to develop the use of AAA-rated covered bonds for renewable energy in the German market, including exploring regulatory changes required.
Our vision is to achieve investment-grade rating for a wide range of low carbon projects that achieve the scale needed to transition to a low carbon economy.

Market Growth: Partnerships and solutions to deliver risk-adjusted returns

- Designing regional development forest bonds to avoid deforestation
Forest loss around the globe is releasing billions of tonnes of CO2 and destroying irreplaceable biodiversity. The world needs to increase forest finance by tens of billions of dollars in the current decade just to halve this forest loss.
In partnership with WWF and the Global Canopy Programme, this project looks at tapping bond markets with investment-grade forest bonds utilising a range of revenue streams to pay the bonds back. Sources of revenue generation to provide returns on a regional development forest bond would include REDD+, payments for watershed services, environmental taxes, sustainable timber revenues and employment-generating industries.
- Municipality-driven energy efficiency financing models
UK Green Deal and US PACE-style financing models provide a key foundation for the commercial financing of energy efficiency schemes. But significant design challenges remain before such schemes will reach the scale required to meet emission reduction targets.
This project is designing financing schemes that overcome the hurdle of take-up and that are capable of being scaled up to national levels. Partners are UK Energy Saving Trust, Ecofin Research Foundation and Marksman Consulting.
- Demonstrating climate bonds deal flow
The Climate Bonds Initiative is engaged in projects to demonstrate new climate bonds deal flow in both developed and emerging economies, including Australia, India, Korea, Turkey, Germany, the United States, the United Kingdom and Samoa.

Partners
Through its various projects, the Climate Bonds Initiative is working with:
Aviva Investors
CalSTRs
California State Treasurer’s Office
Carbon Disclosure Project
Carbon War Room
Ceres Investor Network on Climate Risk
ClimateWise
Clinton Climate Initiative
DNV
Energy Saving Trust
European Climate Foundation Global Canopy Programme
KPMG
International Finance Corporation
Investor Group on Climate Change
Nature Resources Defense Council
Shearman Sterling
Standard & Poor’s
TransformUK
UK Government’s Capital Markets Climate Initiative
UNEP SEF Alliance
WWF