Climate Bonds Standard& Certification Newsletter
Q2 2017 ISSUE 4

US munis lead while Washington withdraws‘Invest in the planet – Invest in the MTA’The US municipal market continues to be anupbeat story of growing green investment,even while headlines focus on the countries
withdrawal from the Paris Accord and efforts
to weaken the G7 & G20 consensus onclimate action.

BART mirrors the 2016 ’Invest in the Planet Invest in the MTA’ campaign from New York’s
Metropolitan Transport Authority (MTA) that
popularised green bonds to a wider audience.
MTA is set to soon become the largest
municipal green bond issuer. They’ve issued
USD2.7bn across six bonds – all Certified.

’Be Climate Smart’ says BARTThe San Francisco Bay Area Rapid
Transport’s (BART) USD385m Certified
Climate Bond for low carbon transport
included an offer to “mom & pop” retailinvestors accompanied by social media
promotions across the transport networkof “Be Climate Smart – Invest in BART”.

Cities and sub nationals drive climate action

And BART has more in the pipeline. Last
year, locals voted to pass a measure to issue
USD3.5bn to improve transport infrastructure.
BART is making the most of the programmaticroute to Certification; a streamlined process
for regular Certified Climate Bond issuers.
This is just the start of their programme.

ABSCommercial Bank16•

Corporate

4bn

32%
30%

3bn
2bn

19% 52%60%

1bn

The governors of California, New York &Washington have now formed the US Climate
Alliance and authorities in all three states
have also issued green bonds.

More green bonds & more Certifications

State and city level action in the US does notmean small scale: California and New York
alone make up over 20% of the US economy.

•Development Bank•

Muni/Provincial/City0
Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

The decision to withdraw from Parishas galvanized sub-national counterreaction. Coupled with the need to renew
infrastructure, and the imperative to be
climate resilient means we’re seeing growing
green issuance.
Climate Bonds Certification is proving a
useful tool to give investors confidence in theenvironmental credentials of investments.
Expect to see more Certified Climate Bondofferings and a sharper climate message.
Additionally, the response from smallinvestors is a significant pointer to changing
community attitudes.

128USD bn

Green labelled bonds
Certified Climate Bonds

Even in Houston, spiritual home of the US oilindustry, the green bond message is getting
through, with the Fort Bend School District
issuing a green bond related to buildings.

Green muni bonds make up 41% of total US issuance 2013–17• •Climate Bonds Certification getstraction in US muni market

4
16.8%02013

2014

2015

2016

2017 ytd

The White House is walking the USbackwards, but at a sub-national level, statesand municipals are leading green investment
forwards. Follow the money.

Coming soon, new Climate Bonds Criteria:
Things have been a bit quiet on the newCriteria front recently, but behind thescenes, the Standards Team havebeen deep in conversation with ourTechnical Working Groups (TWGs)and Industry Working Groups (IWGs)
developing the Criteria.

Release or public consultation imminent for:Criteria development is time-consuming
as they must be science-based, simple,
robust and applicable to a range of assets.

Q2 2017 ISSUE 4•

Marine Renewable Energy Criteria•Nature Based Water Criteria•

Bioenergy Criteria•Forestry & Land Conservation Criteria•Fisheries Criteria

Consultation and release of new Criteria
is announced in our our blog andwe always run accompanying webinars
for details and Q&A.
Criteria release is always an exciting
development as it opens up Climate Bonds
Certification to new asset types and newissuers, increasing its reach in the green
bond market.

PAGE 1

In other news…
China & EU lead on climate
action & green harmonisation

EU Expert Group on sustainablefinance releases interim report

GBPs updated & supplemented
with social bond principles

The world is looking to China and theEU to lead the way on climate action. InMarch 2017, the People’s Bank of China(PBoC) and the European Investment Bank(EIB) established a joint green financeinitiative to combine policy and market
best-practice to strengthen frameworks
for green investment and harmonise
green definitions.

The High Level Expert Group (HLEG) interim
report identifies directions to build green
finance and investment in the EU to meetemissions reductions in-line with the Paris
Accord. Early recommendations include
establishing a European standard and label forgreen bonds and other sustainable assets. OurCEO, Sean Kidney, is a member of HLEG.

In June, the Green Bond Principles (GBPs)
released its annual update. They continue
to recommend 10 broad project categories
eligible for green bond issuance.

Currently, there are several different sets ofgreen definitions, such as the Climate Bonds
Taxonomy, Green Bond Principles (GBPs),
and China’s Green Bond Endorsed ProjectCatalogue. Some projects are consideredgreen by some definitions and not by others.

“The scientific community could
do a great deal more to define
what is green…We are, at theend of the day, bankers. We are
not environmentalists, we can’t[be expected to] determine
ourselves what is green”
Phil Brown, Citi Global Markets(quoted in Environmental Finance)

For example, Repsol’s recent bond fits
within the GBPs definition of green, but
not all investors agreed as the proceeds
finance efficiency improvements to oil andgas refineries. Similarly, in China, highefficiency fuel production and “clean coal”
can be included in green bonds, but someinternational investors disagree.
Harmonising green definitions and standardsacross different markets would help
issuers to know what’s acceptable in theinternational green bond market, and help
them meet the expectations of international
investors. It would also reduce the costs of
issuing by avoiding duplication of verificationand certification in different markets.
The EU-China green finance initiative is a
joint effort to map and compare approaches
to green assets/projects eligibility, toharmonise green definitions and enhanceinvestors’ confidence. The EU and China
have recognised the importance ofstrengthening green investment forsustainable growth and for achieving theCOP21 goals, and have demonstrated theircommitment to enhance the role of capital
markets to support green finance.

Q2 2017 ISSUE 4

HLEG is now seeking feedback on this report.

With this update, the GBPs also released theSocial Bond Principles to acknowledge useof proceeds that include social objectives
too, such as affordable basic infrastructure,
employment generation and food security.

Broader global movement toharmonise green definitions

Expanding the application of theBuildings Criteria

In Taiwan, the Taipei Exchange, has released
a green bond promotion plan. The Exchange
has used this plan to develop green bondguidelines, which the Commission approved.
These will assist green issuers obtain capitalby instructing on projects that can be
included in green bonds.

The Buildings TWG is exploring if data
extrapolation can expand the Buildings
Criteria’s application by providing lowemission trajectories for more cities.

Since coming into effect, four Taiwanesebanks have issued green bonds.
In India, the Securities & Exchange Board ofIndia (SEBI) has just issued its ‘Disclosure
Requirements for Issuance & Listing ofGreen Debt Securities’. These list high-level
categories for what is green and are in-linewith the Climate Bonds Taxonomy and GBPs.

First meeting of the TEECLabel Committee
The TEEC (Energy and Ecological Transition
for the Climate) Label, launched in 2015 by theFrench Ministry of Environment, and whichdraws heavily on the Climate Bonds Taxonomy
for their Criteria, recently had the first meetingof its Committee. We joined the meeting led
by the Commissioner-General for Sustainable
Development (CGDD). Areas of evolution ofthe Criteria was the topic under discussion.
Eight funds have been awarded TEEC
certification to date, amounting toapprox. EUR1bn.

ETFs launched & include projectsaligned with our taxonomy
Two dedicated green bond Exchange TradedFunds (ETFs) have been launched. The Lyxor
Green Bond ETF tracks Solactive Green BondIndex while the VanEck Vectors Green BondETF tracks S&P Green Bond Select Index.
Since the constituents in the two indices
are labelled green bonds defined by theClimate Bonds Taxonomy, the ETFs represent
investment in eligible green projects andassets in-line with our taxonomy.

We already have trajectories for US andAustralian cities and Singapore, but thisdata extrapolation should allow us to set
baselines for cities in temperate climes.
The good news is: it’s looking like this will
work and could open up Climate Bonds
Certification to any city in the temperatezone – watch this space!
If you are looking to issue a Certified
Climate Bond for buildings in a city not yet
listed as certifiable, please contact us.

Climate Bonds events& publications
Marine Renewable Energy webinar
Watch Marine Renewable Energy publicconsultation webinar here.
Water webinars soon
Water Criteria public consultation
webinar will commence in July andAugust – dates to be confirmed soon
and announced in our blog.
Report on green bond reportingSee our most recently published report:‘Post Issuance Reporting in the Green
Bond Market – Trends & Best Practice’.
Stay tuned - Follow Climate Bonds!
Other upcoming events and the latest
news are announced via the Climate
Bonds Blog, subscribe here and follow us:

www.climatebonds.net

PAGE 2

Summary of Certified Climate Bonds
Issuance to dateCertified Climate Bond Issuance
Biggest quarterto date$16bnTotal
to date$15.8bn

$12bn
$8bn

$1.67bn$4.4bnCertified
Climate Bonds
issued$4bn
0Q4 2014

Q2 2015Q24 2015

Over Q1 and Q2 of 2017, USD6.5bn ofCertified Climate Bonds have been issued,raising the total of Certified Climate Bonds
to USD15.8bn. USD4.4bn and USD2.1bn
were issued in Q1 and Q2, respectively.
In 2016, USD7.5bn Certified Climate Bonds
were issued, meaning that at the halfway
point of 2017 we are only USD1bn shy of thetotal Certified Climate Bonds for the wholeof last year. Assuming that this rate ofissuance continues, we’re hoping to see atleast USD12bn of Certified Climate Bonds
by the end of the year.

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Issuers value Certification for a range
of debt instruments

Luxembourg, Mauritius, Singapore & Brazil
enter the Certified Climate Bond market

Version 2.1 of the Climate Bonds Standard
opened up Certification for debt instruments
other than bonds.

In 2017, the geographical range of Certified
Climate Bonds has expanded further with firstissuances from Luxembourg, Mauritius andBrazil in Q1 and Singapore in Q2.

ABN AMRO, Nordex, Strasser Capital andQuadran have all taken advantage of thisby certifying loan facilities, schuldscheins
and securitised bonds.
A full list of the debt instruments Climate
Bonds Certification are applicable to, isavailable on our website.

The first Brazilian issuer was CPFL Energias
Renováveis and their bond was actually
issued in Q4 2016. However, they applied
and were awarded Climate Bonds
Certification post-issuance in Q1 2017,
hence CPFL’s bond joined the ranks ofcertified bonds this year.

Q1 2017 has also taken over as the biggest
quarter to date with USD4.4bn issued. Alpha
Trains, Commonwealth Bank of Australia,
FlexiGroup, IREDA, NAB, ReNew Power, MTA,NYSHFA, QTC, SNCF, Strasser Capital andWestpac all issued in that quarter to help top
the previous record held by Q2 2016.

In 2017, we’ve also Certified our first Climate
Bond from a government agency. The Indian
Renewable Energy Development Agency
Ltd. (IREDA) became the first government
backed agency to get Climate Bonds
Certification for its INR2bn & INR5bn windand solar bonds.

Use of proceeds remains widelydistributed out between sectors

Govt agencies and other debt
are Certified for first time

New entrants appear but US& Australia continue to lead

Other debt
instrument 5%

Singapore <1%

Mixed
22%

Mixed
Energy14%
Wind8%

Muni
Provincial
City
30%

Solar 2%Geothermal 2%
Water 3%Q2 2017 ISSUE 4

Mauritius 3%
UK <1%ABS
10%

Buildings
10%

Transport
34%

Gaining certification post-issuance isavailable for any already issued bondprovided that its nominated assets comply
with the Climate Bonds Standard. Issuers
are doing this to access the reputational
benefits that Certification brings.

CommercialBank
27%

Corporate
24%
Development Bank 3%
Govt agencies & statebacked entities 1%

United States
24%

Australia
21%

France13%
Netherlands
16%
Philippines
1%

India
7%

Germany
8%

Brazil <1%
Lux 2%
Mexico 3%
Morocco <1%

PAGE 3

What’s happening with our TWGs?
WaterMarine

Land Use

Phase I Status:
Criteria approved

Status (Renewables):post-public
consultation

Status: TWG
developing Criteria

Phase II Status: public
consultation imminent
Phase II of the Water Criteria, covering
nature-based and hybrid infrastructurefor water capture, storage, treatment,
flood/drought defence, stormwater management, and ecologicalrestoration, has progressed well.
In Q2, we have addressed commentsfrom the IWG by updating the Criteria
document, background paper andguidance note. Public consultation
will commence in July and will beannounced on our blog. The proposed
Criteria will then be available online
and we look forward to your feedback.

Waste
Management

Status (Fisheries, Aquaculture &Coastal Infra): TWG developing Criteria
As mentioned above, the Marine
Renewable Energy Criteria have beenout for public consultation, you can stillread the draft Criteria here or watch
the webinar here. There were no major
objections during public consultation,so we’ll finalise the documents and takethem to the Climate Bonds Standard
Board for comment shortly.
Development continues with the otherareas of Marine with Fisheries advancing
the fastest. We’re hoping to get theseout for public consultation during Q3.

We are now looking at
taking an activity-based approach to theLand Use Criteria. This will mean there
will be Criteria released for various
areas of Land Use, with the first most
likely being Forestry & Conservation.
Taking this approach will allow us tohave more ambitious mitigation criteria
in areas where that is possible. And it
will also allow us to roll Phase I (theGHG mitigation work) and Phase II(the climate adaptation and resiliencework) into one release. This will meanthat final Criteria will have mitigation
requirements and climate adaptation
and resilience requirements.

The TWG is currently working to develop
Criteria covering a range of end-of-life
waste management strategies. Using
life cycle assessment modelling andliterature reviews, the TWG is assessing
which waste management strategies arecontributing to a below 2-degree world.

As many of these waste material supply
chains are transnational, emissions
allocation and associated impact
reporting pose challenges, requiring
special attention from the TWG.

Bioenergy

Hydropower

Buildings

Status: post public
consultation

Status: TWG
developing Criteria

The TWG iscomparing our approaches under other
Sector Criteria to develop consistentrequirements for adaptation andresilience. These require issuers to haveprocesses to assess and address theclimate vulnerability of their assets andany climate risks to the surrounding
ecosystem.

During Q2, theTWG have been working on theenvironmental and social requirements
by examining existing tools that addressthese impacts. The idea is to leverage
existing tools where appropriate, anddevelop Criteria consistent with bestpractice in hydropower.

Status: Criteria
approved – now
being expanded

Status: TWG
developing Criteria

The TWG is also analysing the robustnessof environmental best practice standards
in the bioenergy sector to determine
what can be leveraged for the Criteria.
Discussion on mitigation requirements,
including GHG emissions threshold, scopeand methodologies of GHG life cycleassessment, are being rounded up.
We will be checking in with an Industry
Working Group on these proposals in Q3.

Q2 2017 ISSUE 4

Next, the TWG will focus on developing
adaptation and resilience requirements,again looking to leverage existing tools.
We have recently convened theHydropower IWG with representationfrom around 20 organisations. The
IWG will review and provide feedbackon the approach proposed by the TWG
to address mitigation, adaptation &resilience, and environmental & social
impacts in the hydropower sector.

Under the Buildings Criteria, we have been
continuing to source potential proxies forcertification across a range of locations.
We are about to release an updated
emissions intensity proxy for residentialbuildings in England & Wales (fromanalysis of the Energy Performance
Certificate Scheme), and a proxy forresidential buildings in Australia (fromanalysis of Building Code of Australia(BCA), National Construction Code(NCC) and The Nationwide House Energy
Rating Scheme (NatHERS)). This covers
residential assets including mortgage
backed securities.
Progress continues on Energy Efficiency
Criteria for building components,including lighting, sensors and fans.

PAGE 4

Snapshot of Certified Climate Bonds
Q2: April – June 2017
Brazil*Singapore

CPFL Energias Renováveis, BRL200m, Wind

CDL Properties Limited, SGD100m,Low Carbon Buildings

USA
San Francisco Bay Area
Rapid Transport System,
USD384m, Low Carbon
Transport
MTA, USD189m & USD
680m, Low Carbon
Transport

India*Australia

Hero Future Energies, INR1.75bn,
Solar & INR1.25bn, Wind

Investa, AUD100m & AUD150m,
Low Carbon Buildings

NYSHFA, USD78m, Low
Carbon Buildings

Westpac, USD50m, Low Carbon
Buildings & Wind

*Bond was Certified post-issuance

Certified in Q2, but not issued in Q2

Gaining certification post-issuance is available for any alreadyissued bond provided that its nominated assets comply with
the Climate Bonds Standard. Issuers are doing this to access thereputational benefits that Climate Bonds Certification brings.

We’ve actually Certified a lot more bonds this quarter than shown
above. However, issuers will often hold from issuing until market
conditions are just right and we can only disclose the bonds thatare Climate Bonds Certified issued.

New Approved Verifiers: CCXI, Deloitte France, Deloitte Luxembourg
and Raising Clean-tech Investment Consulting Co.
Meet the Climate Bonds Standard & Certification teamAnna Creed
Head of Standards

Lily Dai
Research Analyst Bioenergy,
Water & Hydropower

Cory Nestor
Research Analyst
Buildings & Waste

Katie House
Research Analyst
Marine & Land Use

Rob Fowler
Head of Certification

Matteo Bigoni
Certification
Manager

Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference to a financial organisationor debt instrument or investment product is for information purposes only. Links to external websites are for information purposes only. The Climate Bonds Initiative accepts no responsibility for content on externalwebsites. The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within this communication should
be taken as such, nor should any information in this communication be relied upon in making any investment decision. Certification under the Climate Bond Standard only reflects the climate attributes of the use ofproceeds of a designated debt instrument. It does not reflect the credit worthiness of the designated debt instrument, nor its compliance with national or international laws. A decision to invest in anything is solely yours.
The Climate Bonds Initiative accepts no liability of any kind, for any investment an individual or organisation makes, nor for any investment made by third parties on behalf of an individual or organisation, based in whole
or in part on any information contained within this, or any other Climate Bonds Initiative public communication. © Climate Bonds Initiative. Published on July 2017. Designed by Godfrey Design.

Subscribe - Sign up here to our blog and receive our newsletters in your inbox.
Q2 2017 ISSUE 4

www.climatebonds.net
PAGE 5