FOR IMMEDIATE RELEASE

Renewable Energy Covered Bonds - how to adapt the coveredbond market to bring capital into the low-carbon economy
Climate Bonds Initiative suggests covered bonds as a means to get banklending flowing again
LONDON, 23 May, 2012 – A proposal to create Renewable Energy Covered
Bonds to leverage private-sector investment into the low-carbon economy wastoday released by the Climate Bonds Initiative. The €2.5 trillion covered bonds
market provides for a unique dual recourse structure that offers investors a highdegree of security.
“The current financial crisis has forced banks to cut back on lending as a result of
severe losses of capital and the forthcoming Basel III regulation represents afurther restraint on bank lending”, says Sean Kidney, Chair of the Climate Bonds
Initiative and a co-author of the proposal. “Governments, on the other hand,which have been the main supporters of clean energy are unlikely to increase
investment given tightened fiscal conditions”.
Proposal co-author Frank Damerow of LBBW Bank, notes that: “Covered bonds
have proven to be a reliable source of term-dated funds for banks to on-lend inspecific sectors targeted by policy makers. Covered bonds are highly regulated
and enjoy superior ratings and lower funding costs. Banks would benefit fromissuing ‘Renewable Energy Covered Bonds’ as it would give them access to awider pool of term-dated funds with which they could increase their lendingactivities”.
“Renewable energy projects don’t have the long-term financial track records thatbond investors need. However, covered bonds have a unique feature: the coverpool of assets is visible and open to analysis”, says Stuart Clenaghan, Principalof Eco System Services and the third co-author. “Disclosure standards are
increasingly defined by law, and issuers frequently provide additional information
above the minimum requirements. Once specific reporting standards are
established, investors could improve their understanding of how renewableenergy assets perform, without having to take a direct credit exposure”.
“The transition to a low-carbon economy is possible by mobilizing private andinstitutional investments. The world’s largest pool of capital - $95 trillion bondmarket – has largely been untapped for renewable energy finance”, says Sean
Kidney. “Existing covered bonds legislation that investors are familiar with caneasily be adapted to accommodate loans for renewable energy. Renewable
Energy Covered Bonds would be made up of ring-fenced, highly regulated andsecure assets”.
According to the International Agency Authority (IEA) an additional $1 trillion
global investment each year is required to reduce emissions of greenhousegases to a safe level.
In 2010, the G8 committed to work to limit global temperature increases to amaximum of 2 degrees centigrade.
“Investments in renewable energy projects are necessary before a climate
tipping-point is reached. Achieving the scale of investment required is not aneasy task especially given the urgency required. However, whilst bespoke
climate covered bonds legislation is being developed, a renewable energy
covered bond market could be kick-started with the use of guarantee by agencies
such as the European Investment Bank”, says Sean Kidney.
-EndsAbout Climate Bonds Initiative:
The Climate Bonds Initiative is an investor-focused not-for-profit, promoting
large-scale investment in the low-carbon economy. The Climate Bonds Initiativeis developing:·Proposals for governance architecture — regulatory mechanisms,standards, tax policies, green banks — that will support a rapid scaling up ofinvestment.
·Models for engineering investments in projects and assets necessary for
attracting bond financing such as renewable energy, energy efficiency andforestry.

For more information or interviews:
Sean Kidney, Chair, Climate Bonds+(44)752506-8331.
Useful links:
ClimateBondsInitiative’s
through www.climatebonds.net	  Initiative, sean@climatebonds.net,

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