This week, the Climate Bonds Standard and Certification Scheme, released a significant expansion to its scheme with a new Company-level Certification. This certification indicates to investors that a company is a green entity committed to a Paris-aligned pathway of limiting global warming to 1.5-degrees.
The Climate Bond Certification focuses on key aspects necessary to demonstrate a credible transition for debt instruments, such as Sustainability-Linked Bonds (SLBs), and goes beyond to conduct deeper company-level assessments. This provides assurance on the climate credentials of the corporate entity, extending certification not only to their labelled debt but also to their wider general-purpose debt and equity investments.
The Climate Bonds Standard Certification is designed to provide granular simplicity and bridge the market gap in existing guidance on transition financing. It supports all transition efforts, provided that the goals, the path, and the pace are suitably ambitious. As a result:
– Corporates and SLBs from all sectors will be eligible for certification
- Agriculture
- Protected Agriculture
- Basic Chemicals
- Bioenergy
- Buildings
- Cement
- Electrical Grids and Storage
- Low Carbon Transport
- Forestry, Land Conservation and Restoration
- Geothermal Energy
- Hydrogen
- Hydropower
- Marine Renewable Energy
- Shipping
- Solar Energy
- Steel
- Waste Management
- Water Infrastructure
- Wind Energy
- Crop and Livestock
- Value Chain Criteria
- Fisheries (not active)
– Corporates and SLBs that are already on 1.5-degree pathways are eligible for certification, as are those that will align with those pathways by 2030 at the latest (so long as they can demonstrate the ambition of their future performance targets and the credibility of their transition plans to deliver on those targets).
Climate Bonds Certification
“Sustainability-linked bonds offer investors influence over climate impact at the company level. This has been a groundbreaking evolution in environmental finance, leaving investors scrambling to part with their capital. Corporate entity certification will unleash the force of climate finance beyond bond markets towards equities. This is a huge win for the climate and a significant evolution for financial markets, the future of which is sure to rely on credible knowledge on companies’ climate impact.”
Sean Kidney, CEO of the Climate Bonds Initiative
Climate Bonds Certification
The new investment labels for the market include:
– Level 1 – 1.5-degree aligned: Entities, debt instruments, or assets that are already aligned with 1.5-degree pathways. This category includes both those already near net-zero and those above net-zero but within sectoral 1.5-degree pathways and transition plans that predict alignment with those pathways going forward.
– Level 2 – Transitioning to 1.5-degree: Entities or Sustainability-Linked debt whose transition plans predict that they will be aligned with 1.5-degree pathways by 2030.
To be credible, transition plans must exhibit ambition by defining pathways that are compatible with a future of no more than 1.5-degree global warming. Achieving a 1.5-degree future will not only require building up low or zero-carbon industries but must also initiate an inclusive movement by decarbonizing the highest emitters.
Source: CBI