Climate Bonds Standard& Certification NewsletterQ3 2017 Issue 5

Giant Chinese & Indian organisations take Certification path
ICBC: Climate Bond Certification
for world’s largest bank!

ICBC sets the best practice bar
ICBC received Climate Bonds Certification,with Zhongcai Green Finance carring out
the verification. Zhongcai also provided
assurance against Chinese standards, andCicero provided a second opinion.
ICBC has set the bar high in adoptinginternational best practice for this bond andwe expect other Chinese issuers includingbanks will follow their positive example.

You don’t get any bigger than state owned
Industrial and Commercial Bank of China(ICBC) - it is the largest publicly listedcompany. So, we’re very excited that its
inaugural USD2.15bn One Belt One Road
(OBOR) green bond is Climate Bonds
Certified.

Greening the One Belt One Road

Use of proceeds are renewable energy, cleantransport, energy efficiency & sustainable
water management.
The bond was listed on the Luxembourg
Green Exchange and European investors took
over 70%, issued in three tranches of EUR
1.1bn, USD450m and USD400m.

OBOR is a development campaign for China
to boost trade and stimulate economic
growth, across and beyond Asia.
It is providing huge investment opportunities
for green infrastructure projects and President
Xi has stressed OBOR needs to be green.
This Certified issuance from ICBC brings
President Xi’s promise of making OBOR
green into action.

Masala is back & IREDA goes 1st
with a Certified Climate BondThe Indian Renewable Energy Agency(IREDA) has issued a Climate Bonds Certified
Masala Green Bond worth USD300m. Thisis the first green masala bond by a financial
institution.
By obtaining Climate Bonds Certification,
IREDA has set a positive precedence forsubsequent Indian issuers.
Proceeds are for renewable energy projects
across India that will help the Indian
Government achieve its vision of 175GW
renewable energy capacity by 2022.
The deal achieved the tightest ever yield in a
public masala issuance.

East Coast-West Coast lead on US green muni issuance
Latest figures show East Coast-West Coastleading the US muni green bond market.
New York is in front with USD4.5bn,
California just behind on USD4.3bn. Adding
Massachusetts, Washington State andConnecticut reinforces the coastal profile.
All five states are members of the Climate

Alliance, pledging to continue to work
towards meeting US emissions reduction
targets. And they’re increasingly using
Certification for their green issuances.

of Programmatic Certifiers (see pg.2). On theWest Coast, Certifications from SFPUC andBART are soon to be joined by another largetransport authority.

Issuers in California and New York have been
early adopters of Climate Bonds Certification
with New York State HFA and MTA on the list

We expect to see other green bond issuingstates follow this best practice example andbegin using Climate Bonds Certification soon.

Top 10 US State green bond muni issuers 2013-Q3 2017
Climate Bonds Certified

40

Pg. 2 - Programmatic Certified Climate
Bond Issuers: Who? What? Why?

Q3 2017 Issue 5

Ohio

IllinoisPg. 5 - Harmonisation of the green bondmarketIowa

IndianaPg. 3 - Facts and figures from Q3

Colorado

Massachusetts

0

California

10

New York

20

Connecticut

Pg. 2 - Launch of the Marine Renewable
Energy Criteria

Washington

5030$ Billions

Read on for:Green Bond

Page 1

0

Speaking at Climate Week, New York City,
Sean Kidney encapsulated the challenge inthese terms: “Capital flows must shift: More

BrazilIndia

Australia

CanadaSpain

Sweden10

France

20

China

30

Netherlands

Germany

40

United States

To date the US remains the single largest
national issuer. However, China, France andgermany are not far behind. We expect
China to continue its expansion (ICBC’s
Certified bond (pg.1) is a clear indication
they intend to), India will move up the ranks
and green flows from european nations
should grow as the eU HLeg process shifts
to implementation.

50

Supranational

The California Treasurer, with the Milken
Institute and environmental Finance, will
be hosting a green Bond Symposium in
February 2018. governor Brown is also
holding a global Climate action Summit in
San Francisco in September 2018 to coincidewith PRI’s annual conference.

US leads on green bond issuance, but other nations are not far behind
Total green bonds issued ($ Billions)

US green finance action in 2018vanilla bonds must become climate-aligned.
More climate-aligned bonds must become
green bonds.”

Standard matures & expands as it gathers momentum
New Sector Criteria for Marine
Renewable Energy just released

In early October, we were excited toannounce the release of our latest set of
Sector Criteria: the Marine Renewable
Energy Criteria. These Criteria lay out
disclosure, GHG emission mitigationand climate adaptation and resilience
requirements that marine renewable energy
investments must meet to be eligible for
Climate Bonds Certification.
Marine Renewable Criteria cover ALL
offshore renewable energy
A diverse array of technologies are being
developed and deployed to harness clean
power from tides, waves, ocean currents,
offshore wind, offshore solar and salinity
and temperature gradients. Technology
convergence has not yet occurred.
These Criteria can be applied to all thesetechnologies, both established and emerging.
Increased renewable energy generation
capacity and associated climate resilient
infrastructure is essential to move to a lowcarbon economy and is definitely in line withlimiting warming to 2˚C – the key principle
we guide our Criteria by.
Despite the inherent climate compatibilityof all renewable energy, distinct Criteria formarine investments are necessary:

Q3 2017 Issue 5

1. To ensure sufficient transparency anddisclosure
2. To confirm the facilities do not rely on
substantial fossil fuel back-up
3. To confirm the resilience of the assets
fundedDeveloped by our Technical & Industry
Working Groups
A big thank you goes out to our dedicatedTechnical and Industry Working Groups
for their instrumental role in developing
these Criteria.
The race is now on to become the firstissuer of a Certified Climate Bond for Marine
Renewable Energy!

Download the NEW Criteria

Programmatic Climate Bonds
Certification taking-off
Programmatic Certification makes thecertification process more cost effective forissuers that intend to issue multiple Certified
Climate Bonds in one year.
It is a streamlined process to Climate Bond
Certification that was introduced in thelatest version of the Climate Bonds Standard(Version 2.1) in early 2017. It allows an
issuer to verify that a large pool of assets arecompatible with the Climate Bonds Standard
and then issue Certified Climate Bonds fromthat pool as and when they want to.
Programmatic Certification is quicker for
issuers coming to market multiple times
During the typical verification process,issuers must engage with a verifier for preand post-issuance Certification.
With Programmatic Certification, whilst
issuers must still complete pre- and postissuance Certification for their first bond,they then only need to engage a verifier ona yearly basis, thereby significantly reducing
the verification load.
This option has been very popular.

First 10 issuers of Programmatic
Certified Climate Bonds:

1

New York MTA - USA

2

New York State Housing FinanceAgency (NYSHFA) – USA

3

San Francisco Public Utility
Corporation - USA

4

SNCF Réseau – France

5

Indian Renewable Energy
Development Agency (IREDA) USA

6

San Francisco Bay Area Rapid
Transit (BART) - USA

7

The Rural Corporation
Electrification Limited – India

8

The City of Cape Town – South
Africa9

Azure Power Ltd. – India

10 Contact Energy – New Zealand
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Summary of Certified Climate Bonds
Total
to date$19.1bn

Certified Climate Bond Issuance$20bn
Biggestquarter to
date

$16bn
$12bn
$8bn

$4.4bnCertified
ClimateBonds issued$4bn
0
Q4 2014

Q2 2015Q24 2015

Q1 2016

Q2 2016

Q3 2016

Q4 20162017 Certified issuance has alreadyovertaken last year’s Certified issuance

expand with Certifications from South Africa
and New Zealand for the first time.

At the close of Q3, Certified Climate Bondissuance for 2017 totaled USD9.8bn - over
USD2bn more than the total for last year
(USD7.5bn). The same is also true for total
green bond issuance. At the end of Q3, total
green bond issuance stood at USD83bn
compared to USD82bn for the whole of2016.

Now, the beady eyed among you will noticethat New Zealand does not feature in thebottom right pie chart.

We’re looking forward to reporting the final
figures for 2017 in next quarter’s issue. Will we
get to the USD12bn of Certified Climate Bondissuance we anticipated at the beginning of
this year?
South Africa and New Zealand enter worldof Certified Climate Bonds for the first time

New Zealand’s Certification is fromContact Energy, the the country’s second
largest electricity generator, and it isa Certified debt programme, coveringcommitted bank facilities, commercial
paper, retail and wholesale bonds and US
private placement facilities.
Contact Energy have had a NZD1.8bn
programme Certified. Proceeds are forrenewable energy, mainly geothermal power.

This quarter, the geographical diversity ofCertified Climate Bonds has continued to

So, while this is absolutely a green issuance,
it doesn’t appear in the pie chart becauseof the variety of debt instruments. Climate
Bonds Certification is available for a range ofTransport continues to dominate
Certified Climate Bond issuanceMore Certified issuance,
Corporates take the lions share

Water 3%

Mixed
19%

Mixed
Energy15%

Muni
Provincial
City
29%

Corporate37%

Q3 2017 Issue 5

Review & revisions of Climate Bonds
Standard for version 3.0
As part of our review, revise and update
routine, we will release a new version of
the Climate Bonds Standard, Version 3.0,
in 2018. The new Version seeks to betteralign the Climate Bonds Standard withthe pillars of the Green Bond Principles
to create a more consistent approach to
Certification.
Version 3.0 will be released for public
consultations in late 2017. We’ll announce
the start on our blog. Once in public
consultation we welcome any input or
feedback from all interested parties suchas verifiers, issuers, regulators and policy
makers. After public consultations, we
expect to release Version 3.0 in early 2018.

US, Australia, France &Netherlands lead Certifications
Philippines
MoroccoLuxembourg

5%Commercial
Bank
21%

Development Bank 2%
Govt agencies & statebacked entities 1%

Q3 2017debt instruments other than bonds.

ABS
8%Transport
38%

Solar 5%Wind 7%
Geothermal 1%

Q2 2017

Singapore
South Africa
UK

Other debt
instrument 3%
Buildings
13%

Q1 2017

United States
24%

Netherlands
13%

BrazilAustralia
18%
China 4%
France
16%

India
13%

Germany
6%

Mexico 3%

Page 3

What’s happening with our TWGs?
Water

MarineLand Use

Phase I Status:
Criteria published

Status (Renewables):Criteria published

Phase II Status: IN
PUBLIC CONSULTATION NOW

Status (Fisheries,
Aquaculture & Coastal Infrastructure):
TWG developing Criteria

Status (Forestry):
TWG developing
Criteria

Phase II of the Water Criteria, covering
nature-based and hybrid infrastructure
for water capture, storage, treatment,
flood/drought defence, storm-water
management, and ecological restoration
is now open for public consultation.
Read the criteria document and sign up
for one of our explanatory webinars!
Public consultation was announcedwith the Consortium; Ceres, WRI, CDP,AGWA and SIWI. We’re keen to hear all
your feedback. Please send comments
to Lily Dai.

Waste
Management
Status: TWG
developing Criteria

This month, the Marine Renewable
Energy Criteria were released and can
now be used for Certification (see pg.2).
Development in other Marine areas
continues, currently focusing on Criteria
for Fisheries. Recently, we have been
grappling with GHG thresholds forFisheries. The data is available; thechallenge is working out how to use it.
We hope to get the Fisheries Criteria out
for public consultation before the end of
the year.

The Waste Management Criteria,
covering major infrastructure assets
for managing post-consumer materials
including recyclables, organics, andnon-recyclables is progressing quickly.
The TWG members are currently
discussing methods and metrics

As signalled in the last newsletter, wehave now began taking an activity based
approach to the Land Use Criteria. First up
is the Forestry Criteria.
Development has started and we’ve
begun by identifying activities over arange of forestry assets, from timber
production, plantation forestry and naturalforests to supply chain assets.
The final Criteria will be a list ofactivities, assets and projects that are
eligible for Climate Bonds Certification.
There will also be a climate adaptation
and resilience checklist that projects willneed to comply with.

that can be leveraged to determine
climate compatibility using a range oftools, most notably a robust life cycle
assessment of each asset category
and waste type. Criteria development
currently focuses largely on mitigation,
but resilience will be addressed too.

Bioenergy

Hydropower

Buildings

Status: public
consultation imminent

Status: TWG
developing Criteria

The TWG discussion on
Bioenergy Criteria is nearing completion.
The Criteria covers bioenergy forelectricity, heating and transport, and has
three components: disclosure, mitigation,
and adaptation & resilience.

During Q3, the TWG
has been finalising the mitigation
component. The IWG had two meetings
to discuss the structure of the Hydro
Criteria and the mitigation component.

Status: Criteria
published, now
being expanded

The disclosure component aims toincrease transparency. The mitigation
component is a GHG threshold for the
bioenergy produced that is aligned with
2˚C warming target. The adaptation &resilience component checks issuers haveidentified and addressed climate risks.
Issues such as food security and indirect
land use impact are also covered.
The IWG, made up of industry experts
from about 20 organisations, wasconvened in early October. It has
discussed the practicality of the Criteria.

Q3 2017 Issue 5

Discussion focussed on the GHG
threshold for emissions, scope andboundary of emissions assessment,
emissions allocation methodology andthreshold for predictive screen (if an
issuer passes a predictive screen test, it
demonstrates that they would pass the
GHG threshold so they don’t need to
conduct a GHG emission assessment).
Next, the TWG will focus on developing
adaptation and resilience requirements
leveraging existing tools, such as IHA’s
Hydropower Sustainability Assessment
Protocol (HSAP).

Work continues on the Buildings Criteria,
which currently covers both residential
and non-residential, including commercial
buildings. Zero-carbon emissions
trajectories for commercial assets inseveral major French cities are currently
undergoing review by the TWG and will
be available for Certification use shortly.
These cities include, Bordeaux, Lille, Lyon,
Marseille, Nantes, and Paris.
Progress has also been made in several
other regions. Residential proxies havebeen developed for Australia as well as
England & Wales. Commercial baselines
for New Zealand, including Auckland
and Wellington, have been derived andwill be available for use soon. The TWG
continues to look for building performancedata to expand the list of certifiable cities.

Page 4

In other news...
Harmonisation in the market
EU HLEG Report draws closer
Submissions to the EU High Level Expert
Group (HLEG) on Sustainable Financehave now closed and the final report andassociated recommendations are being
considered for release at the end of 2017.
In July, HLEG delivered an Interim Reportoutlining eight areas for change. However,in recent comments the Chair, ChristianThimann, has indicated this is being honed
down to five.
They include taxonomy, green bondstandards and labels, fiduciary and investor
duty, infrastructure coordination anda stronger engagement by supervisory
bodies around sustainability and risk. We’rerepresented on the HLEG and will keep you
updated as further details come to light.
International Standards Organisation
The International Standards Organisation(ISO), best known for its technicalstandards that support global trade andstandardisation, has recently started working
on how climate friendly technologies andthe finance community interact. Importantly,
these ISO products are fed into the national
standards bodies of most countries throughexisting agreements and infrastructure.
There are two (and perhaps three) ISO
working groups getting underway on green
investment topics. We are deeply involvedin these efforts and we’re optimistic that the
timeline for standards development underthe ISO process will align nicely with theother current global efforts. Please get intouch if you would like to be involved in these
ISO standard setting processes.

Bringing adaptation & resilience
considerations into the Criteria
In 2016, global average temperatures
were 0.99˚C warmer than the mid-20th
century mean, making 2016 the third year
in a row to set a record for global averagesurface temperatures. The planet’s averagetemperature has risen about 1.1˚C since

the late 19th century and we know thateven if we freeze levels of atmospheric CO2
right now, there would be further warming
because of the time lag between peak CO2
emissions and peak temperature rise.
Infrastructure must be climate resilient
With this locked in warming comesincreased heatwaves, reduced availability offreshwater and increased extreme rainfall
events, to name just a few of the impacts.
Of course, these are globally generalisedchanges and what is likely to happen in
specific locations will vary. Current andfuture infrastructure in the pipeline needs
to consider the likely local changes if it is toremain viable.
For example, in the water sector, climatechange is already presenting challenges.
Changing hydrological conditions meanthat water quality, quantity, and the timingof availability are evolving and will continue
to do so. This is evident in the everyday but
also, recently, with extreme events such as
Hurricane Harvey, Irma, Maria, Jose and Lee.

Upcoming events
Water public consulation
webinars
Phase 2 of the Water
Criteria has just beenreleased for public consultation andwe’re running an explanatory webinar
on 20th November. Sign up here.

Recent publications
Bonds & Climate
Change: State of theMarket 2017 reportlaunched

BONDS AND
CLIMATE CHANGE
THE STATE OF THE MARKET2017

AN $895 BILLION
CLIMATE-ALIGNED
BONDS
UNIVERSE

Our flagship annual
report was very
recently released
at New York Climate Week. You candownload it on our website. So far
the Global and Brazilian editions areavailable, with Canada, South Korea andAustralia editions to follow soon.
Prepared by Climate Bonds Initiative.

Commissioned by HSBC.
Bonds and Climate Change www.climatebonds.net September 2017 1

Green bond pricing in
the primary market

Adding resilience requirements into the
Climate Bonds Standard
Through the Climate Bonds Standard, we
recognise that transitioning the economy
to be aligned with no more than 1.5˚Cwarming is going to take emission mitigationand climate adaptation and resilience. The
Sector Criteria currently in development aim
to incorporate requirements for mitigation
component and adaptation & resilience.
For example, to comply with our Water
Criteria, issuers must assess the likely
risks their assets will face and that thesurrounding system will be exposed to,through a Vulnerability Assessment, andwhere needed, an established Adaptation
Plan. The efficacy and thoroughness of bothare evaluated.
The Climate Bonds Standard aims toidentify assets and projects that are truly
climate compatible. To do so, there must be
requirements based on both emissions profileand climate adaptation and resilience capacity.

New Approved Verifiers:
Kestrel Consulting Inc, Deloitte Spain, and Carbon Care Asia join the list of Approved
Verifiers. Approved Verifiers check compliance with the Climate Bonds Standard.

This report, releasedin August, investigates
if green bonds pricetighter than expected.
Download a copy here.

Coming soon...
Bioenergy public
consultation
Bioenergy Criteria will
be released for public
consultation soon. Release will beannounced on our blog.
Buildings Criteria: zerocarbon trajectories for 4
new countries
We will shortly be releasing
zero carbon trajectories for France,
England, Wales and New Zealand.
Release will be announced on the blog.

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
Q3 2017 Issue 5

Page 5

Snapshot of Certified Climate Bonds
Q3: July - October 2017
FranceNetherlands

China*

SNCF, EUR750m, Transport

Obvion, EUR667m, Buildings

China Three Gorges, EUR650m, Wind

USA

South Africa

India

MTA, USD662m, Carbon
Low Transport

City of Cape Town,
ZAR1bn, Water &Transport

Rural Electrification Corp,
USD450m, Wind & Solar

NYSHFA, USD41m,
Low Carbon Buildings

Azure Power Ltd.,USD500m, Solar

New ZealandContact Energy, NZD1.8bn,
Geothermal (see pg.3 formore details)*Bond was Certified post-issuance

Certified in Q3, but not issued in Q3

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 the
reputational 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. We can only disclose above the bonds thatare Climate Bonds Certified and issued.

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 organisation
or 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 external
websites. 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 November 2017. Designed by Godfrey Design.

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Q3 2017 Issue 5

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