Climate Bonds Standard& Certification Newsletter
H1 2018 ISSUE 7

Flooding the market with Sector Criteria: Water Criteria
expands covering Certification of nature-based assets

The new Water Criteria were launched on 22
May 2018 by the Water Consortium; Climate
Bonds Initiative, Alliance for Global Water
Adaptation (AGWA), CDP, Ceres and theWorld Resources Institute (WRI).
The Consortium held a webinar to promote
the launch of the Criteria, which you canlisten to here.
The Water Criteria have been developed in
two phases. Phase 1 covers engineered water
infrastructure and Phase 2, that has just beenreleased, covers nature-based and hybrid
water infrastructure for water collection,
storage, treatment and distribution, flood
protection and drought resilience. Phase
2 is fully integrated with Phase 1 into one
comprehensive Water Criteria.

The Criteria recognise that ecosystems(including rivers, lakes, natural watersheds,
aquifers and groundwater) are essential tomeet local, national, and global resilience
goals. Nature-based solutions are
increasingly being integrated within formal
water management systems as green andhybrid infrastructure.
Developed for green bond issuers andinvestors, the Water Criteria define andevaluate low carbon and climate resilient water
infrastructure projects by encompassing two
components: climate mitigation, and climate
adaptation & resilience.
The mitigation component requires GHG
emissions of water infrastructure to beequal to, or less than business-as-usual. The
adaptation & resilience component requires

Member of the EU TEG to develop
Sustainable Finance Taxonomy
Early June brought some eagerly awaited
news when the members of the European
Commission’s Technical Expert Group (TEG)
on Sustainable Finance were announced andSean Kidney, CEO, was awarded a place.
The full list of members can be found here
and the Group has now met twice.
The TEG is tasked with developing:
1. An EU taxonomy of environmentally

sustainable economic activities
2. An EU Green Bond Standard
3. A category of low carbon indices for use byasset and portfolio managers as a benchmark
for a low carbon investment strategy
4. Metrics allowing improved disclosure on
climate-related informationwater infrastructure to be resilient to climatechange risks.
Since the launch of Phase 1 in 2016, about
USD1.5 billion of green bonds issued by the
San Francisco Public Utilities Commission
and the City of Cape Town have beencertified under the Water Criteria.
Our thanks goes to the members of the Technical
Working Group and Industry Working Groupfor their time and valuable expertise that helped
shape these Criteria; and our sincere gratitude to
Stockholm International Water Institute (SIWI)
for their support; and to the US Department ofAgriculture’s Natural Resources Conservation
Service, the KR Foundation and the Rockefeller
Foundation for their funding support.

Read on for:Pg. 2 - Climate Bonds Taxonomy
Pg. 3 - H1 2018 Certifications
Pg. 4 - Financing low-carbon buildings
Pg. 5 - Sector Criteria timeline
Pg. 6 - What’s happening with TWGs
Pg. 7 - Snapshot of Certified Bonds

Sean has been selected to primarily help withthe development of the taxonomy. He’ll be
feeding in the learnings we have gained andBuilding Sustainable
Infrastructure
for Everyone
H1 2018 ISSUE 7

PAGE 1

Criteria we have from developing the Climate
Bonds Taxonomy, the various Sector Criteria
and through our wide engagement with theclimate finance world.
Our Taxonomy and the Sector Criteria
were developed through multi-stakeholder
approaches and are grounded in climate
science. They push for a rapid transition
to a low carbon economy and this is what
we will be advocating in the EU taxonomy
development.
The Group is expected to meet regularly
until June 2019 and its first deliverable is,the climate mitigation part of the taxonomy,
is due March 2019. Climate adaptation andother environmental activities will follow.
Our participation follows the active andpivotal role we played in the High Level
Expert Group on Sustainable Finance (HLEG)
last year. HLEG’s work culminated in January
2018 through the publishing of a final reportcomprising strategic recommendations fora financial system that supports sustainable
investments.

Public consultation gathers youropinions on proposed Criteria for
Forestry & Bioenergy

The list of sector Criteria developed under
the Climate Bonds Standard continues togrow with draft Criteria for Bioenergy andForestry having recently gone through public
consultation.
Once the development stage of any Sector
Criteria is finished, the Criteria go out for
public consultation. This allows anyone toprovide their valuable input and insights
to the proposed Criteria, helping us tomake each set of Criteria as robust andscientifically grounded as possible. It
provides extra confidence to investors that
their investments contribute to limiting
global warming to 2 degrees.
Public consultation for both Bioenergy
Criteria and Forestry Criteria has now
ended but you can still view the Criteria andassociated documents online. We are now
responding to comments and both Criteria
will go to the Climate Bonds Standard Board
for final approval imminently.
If you’ve got a green bond with Bioenergy orForestry related use of proceeds and would
like to find out about getting it Climate Bonds
Certified then get in touch!
Hydropower will be the next Criteria out for
public consultation, which is set to begin in
September. Watch the Climate Bonds Blog
for this announcement.

H1 2018 ISSUE 7

Updating the Climate Bonds
Taxonomy of green investments
The Climate Bonds Taxonomy, whichcurrently lives on our website as a pretty
dense excel sheet, is undergoing arevamp and update. It will be published in
September.
We’re updating both the content, due to new
developments in the Climate Bonds Standard
Sector Criteria, and the format, to make itmuch more user friendly.
The Climate Bonds Taxonomy lists asset
types and whether they are automaticallyeligible, eligible under certain conditions
or never eligible for inclusion in all types ofclimate financing.
It’s a handbook on green investments for
issuers, investors, governments and anyone
looking to raise capital for climate friendlyassets and projects.

Mobilising investments in
Adaptation and Resilience
The majority of green bonds are for achieving
climate change mitigation goals and havelargely ignored needs for investment in
adaptation and resilience (A&R) to thephysical risks climate change poses. Only
92 of the over 2,500 climate-aligned bonds
we’ve tracked have components dedicated toclimate resilience.
As the likelihood of climate-linked disasters
goes up, the need to mobilise additional
finance to address losses as well as to invest
in initiatives that anticipate, plan for, andadapt to the likelihood of growing climate
impact is critical.
Recognising the huge investment gap andwith the aim to scale up A&R investments,
we are convening an Adaptation andResilience Expert Group (AREG) to discussand develop high-level guidance fordetermining when projects and assets arecompatible with a climate resilient economy
and therefore should be certified under the
Climate Bonds Standard.
The AREG will provide a framework underwhich sector-specific A&R Criteria will
be subsequently developed by sectoral
Technical Working Groups (TWGs). A&R
Criteria have already been developed for
Bioenergy, Hydropower, Forestry, and Water
sectors and will feed into the approach.
We expect the AREG to begin discussions
in early October and will keep you updatedof the progress made and points up for
discussion.

Climate Bonds
Taxonomy
Asset types identified as:

Automatically compatible
Potentially compatible
Not compatible
More work required
Climate Bonds Certification
available
Climate Bonds Certification
coming soon

EnergyTransport

Water

Buildings

Land use &marineIndustry

Waste

ICT

PAGE 2

H1 2018 Climate Bonds Certification up 40% from H1 2017
Total
to date$43.5bn

Total Certified Climate Bond Issuance$40bn

H1 2018:
$10bn

$30bn

Q1 2018: $1.9bn
Q2 2018: $8.1bn

$20bn
$10bn
0
Q2
2013

Q3
2013

Q4
Q1
Q2
Q3
Q4
Q1
2013 2014 2014 2014 2014 2015

The first half of 2018 closed with Climate
Bonds Certification of $10bn; a 40%
increase on the $7.2bn issued in the firsthalf of 2017.
H1 2018 saw the first Certified Climate
Bonds under the new Marine Renewable
Energy Criteria from ICBC, ABN Amro,
NAB, and Bank of China. This issuanceshows the clear demand in the market for
financing the rapidly growing offshore wind
generation assets around the world.
Another exciting development includes
the first Certified Climate Bonds from
Scandinavia, a leading region for green bondissuance, but which until now had not used
Climate Bonds Certification. Both Sparebank
1 Boligkreddit and DNB Boligkreditt, two of

Seeing Certified Bonds acrosssectors, mixed UoP for many

Q2
2015

Q3
2015

the largest mortgage providers in Norway,
issued Certified Climate bonds for low
carbon buildings at 1.2 bn USD equivalentand 1.8 bn USD equivalent, respectively.
This flagship issuance signals grand
Norwegian ambitions. They entered theCertified Climate Bond scene with a bang,by making Norway the leading country
during H1 2018.
In fact, over 50% of the value of theCertified Climate Bonds during H1 2018
are linked to low carbon buildings, whichis encouraging, as rapid decarbonisation ofbuildings and ramping up finance to deliver
lower emissions buildings are an importantpart of achieving the Paris goals.

Q2
2017

Q3
2017

Q4
Q1
Q2
2017 2018 2018

Repeat issuance of Certified Climate Bonds
from the Bank of China and Industrial
and Commercial Bank of China (ICBC) in
June was an excellent signal that they areadhering to best practice. They are two of
the most influential banks in China and they
support the Chinese government’s policies
on green bonds. They have seen very clear
benefits from Certifying their first bonds in2017 and were enthusiastic about doing thisagain.
In June, we also warmly welcomed the first
Certified Climate Bonds from Belgium by
KBC Group. This means, we have Certified
Climate Bonds from 21 countries and we
can’t wait to add to that list.

Certified loans starting to take alarger share of Certified market

First Certified Climate Bonds
from Norway & Belgium

Water 2%Wind 7%
Geothermal 4%

Development Bank 5%
ABS 5%
Sovereign 0.1%

South Africa
Belgium Lux
Nigeria
BrazilMexico Philippines UK
Canada Morocco Singapore

Buildings
21%

Nonfinancial
Corporate
10%

Local
Government
21%

Transport
25%
Mixed
33%

Mixed Renewable Energy 7%		Solar 1%H1 2018 ISSUE 7

Q4
Q1
Q2
Q3
Q4
Q1
2015 2016 2016 2016 2016 2017

Non-Financial
Corporate
24%
Government
BackedEntity14%

New
Zealand4%
Germany
6%

China
20%

Norway7%
Financial
Corporate
40%

India
8%
France8% Netherlands
9%

UnitedStates19%
Australia
12%

Loan 5%

PAGE 3Financing low carbon buildings
Seventy per cent oftoday’s greenhousegas emissions in cities
come from buildings,
making the transition to
low carbon residential
and commercial buildings one of the biggest
mitigation opportunities for urban areas.
The Low Carbon Buildings Criteria sets out
what property assets, both residential andcommercial, are low carbon and therefore
eligible for Climate Bonds Certification.
Zero carbon buildings by 2050
To ensure commercial and residential
projects are committed to zero emissions by
2050, we set benchmarks for specific cities
and regions around the world for the Low
Carbon Building Criteria.
Regional variation in building-based energy
and emissions performance and subsequent
reporting standards means we must work
alongside our Technical Working Group(TWG) to assess buildings performance ona country-by-country basis. As this work iscompleted, additional regional trajectories
and market proxies are released for use.
This allows an issuer to stand by their
Certification with certainty, knowing that theassets are third-party verified low carbon.
Third-party certification is achieved in oneof three ways, a trajectory, a best available
proxy, or a significant upgrade.
Trajectory methodology explained
The Trajectory Methodology sets thresholds
that comply with the rapid decarbonisation
required to limit warming to 2-degrees.
The trajectory (in kgCO2e/m ) is establishedby taking the top 15% of buildings in termsof performance in the selected locations anddrawing a straight line to hit net-zero carbon
by 2050. As mentioned, these trajectories
are location specific because emissions
intensity will be affected by regional factors,
such as construction practices or heating
and cooling degree days.
2

A building or portfolio of buildings candemonstrate eligibility for certification if theassets meet a set emissions intensity target
derived from the local low-carbon trajectory.

act as place holders until enough data toestablish a trajectory can be gathered.
We have developed regional trajectories
for residential assets in England & Wales,
Norway, Germany, Belgium, France andGermany, Australia and now, China.

We have worked to establish several
regional trajectories for commercial assets
in Europe, Oceania, North America and now
LatAm, with the development of the Mexico
commercial baseline.

Developed in partnership with Flux
Consulting, the China proxy was establishedusing data from the Evaluation Standard
for Green Buildings database provided by
the Ministry of Housing and Urban-Rural
Development. For more information please
see the China Building Brochure.

Developed in partnership with Flux
Consulting, the Mexico trajectory wasestablished using the Low Carbon BuildingsInterpolation methodology. For more
information of the trajectory please see the
Mexico Building Brochure. To find out more
about the methodology used to establish
the trajectory, please see the Low Carbon
Buildings Trajectory Methodology.

Non-residential developments

We are also in the process of rolling out
additional trajectories with continued
development in North America, Europe, Asia
and Africa throughout 2018.
Proxies explained
Where data availability is limited, and a low
carbon trajectory cannot be establishedwith confidence, we have to review a range ofmarket-based mechanisms such as building
codes, rating schemes and post occupancy
performance evaluations to determine thebest available proxy in the market. TheseAs part of the on-going roll out of the
Low Carbon Building Criteria, we havebegun developing sub-sector criteria forcommercial building such as retail, university
laboratories and other non-residential
typologies.
Low carbon trajectories have been
established for laboratories in several major
U.S. cities including San Francisco, California,
Houston, Texas and Chicago, Illinois.
Others are in the development process foruniversities in the Australian market. Moreinformation on university trajectories can befound on the Commercial Buildings page.

Complying with the Buildings mitigation requirement
The building asset or portfolio of assets must meet one of the following compliance pathways:

Pathway 1: Low Carbon Trajectory

A B

A: Emissions Intensity
Target: The region where
the building is locatedhas an established Low
Carbon Trajectory

A B

Pathway 2: Significant Upgrade
Emissions Intensity Upgrade:
The asset or portfolio of
Aachieves
B a 30-50%
assetsimprovement in emissions
performance

B: Proxy: Theregion has anestablished Low
Carbon Proxy

H1 2018 ISSUE 7

PAGE 4ZERO

ZERO

Sector Criteria published, launched and developing
Pre-Development

Public Consultation

Development

JAN - MAR

Approval for Certification

APR - JUNJUL - AUG

Available for Certification

OCT - DEC

Forestry

Bioenergy

Hydropower

Waste

Buildings

Fisheries

Grids

Rollout of Sector Criteria
continues apace
The calendar above shows the schedule
we’ve got planned for Sector Criteria rollout
in 2018. Forestry and Bioenergy Criteria wereboth released for public consultation in thefirst half of 2018 and we expect they’ll beapproved by the Climate Bonds Standard
Board shortly. If you are keen to use either ofthese Criteria to Certify a bond get in touch.
Hydropower Criteria will be released for
public consultation in late August anddevelopment of Criteria for Waste andFisheries continues. Criteria development
for Electrical Grids commenced in July.
Criteria for Agriculture will be launched in
September, building on the previous work
carried out by our Land Use TWG.

Development for Electrical Grids
Criteria starts
As the development of some
Sector Criteria finishes up
we’re immediately launching
new ones and Electrical Grids
Criteria development is thelatest. To kick-start this Criteria development
we have formed a Technical Working Group(TWG) and Industry Working Group (IWG).

H1 2018 ISSUE 7

At present most attention in the electricity
sector focuses on the carbon emissions ofgeneration capacity and little information
exists for investors on how to avoid gridinvestments which lock in patterns of fossil
fuel dependency.
In addition, methodologies for assessing
physical risks to grids appear to be lacking.
Developing Sector Criteria sheds lighton these issues and will be a valuable
contribution to green finance frameworks.
Over the next 6-8 months, the TWG &IWG will develop science-based screening
requirements that identify transmission,
distribution and storage investments that are
low carbon and climate change resilient.
This will help to align the sector with the
mitigation targets of the Paris agreement.
It will be pivotal in enabling governments,
businesses and investors to assess the green
credentials of projects and assets in theelectrical grid sector, and will allow them tocertify with the Climate Bonds Standard.
Once developed, the Criteria will be released
for public consultation and finally submitted
to the Climate Bonds Standard Board forapproval. We’ll keep you updated of the
progress in these newsletters.

Join one of our TWGs or IWGs members sought for agriculture
and shipping!

2018 was pipped as being a year of Criteria
rollout for the Climate Bonds Standard and it
has certainly started that way. Agriculture andShipping Criteria will be next in the rollout –two potentially massive sectors in the context
of climate change.
Shipping is an entirely new sector for us
to delve into, but the development of theAgriculture Criteria follows the previous work
done by our Land Use TWG.
All Criteria are developed by sector experts
in a scientifically robust way that results instrict green requirements in line with limiting
warming to no more than 2-degrees.
We are currently seeking members to join
our TWGs and IWGs for both agriculture andshipping. If you have technical or industry
expertise in either of these sectors, or financerelating to them, please get in touch with
Sergiu for agriculture, or Katie for shipping!

PAGE 5

What’s happening with our TWGs?
Grids

MarineForestry

Status: TWG
developing Criteria

Fisheries &Aquaculture: TWG
developing Criteria

Status: just closed
public consultation

The new Electrical
Grids TWG, convened in June 2018, hasbegun to develop Criteria. Membershipcomprises universities, NGOs,consultancies, MDBs and industry
associations, with widespread expertisein grids technologies and systems.
Current discussions are on the scopeof the Criteria including chemical
batteries accommodating bidirectional
electrical flows, smart systems andthe quintessential transmission anddistribution assets.

In H1 2018 we had the first certifications
using the Marine Renewable Energy
Criteria. It was a bit of a race to see who
would get in there first and ABN AMRO
took 1st place with its bond for offshore
wind in April 2018. Bank of China,
ICBC, NAB and KBC Group followed
shortly after. Issuers must comply with
mitigation and resilience requirements inorder to be Climate Bonds Certified.

Forestry Criteria
were released for public consultationin early June 2018. We’ve had great
engagement with many different
organisations. Consultation is now
closed but you can still read the Criteria
on our website. We’re responding tocomments at the moment and aim
to present the Forestry Criteria to the
Climate Bonds Standard Board for final
approval in August.

Development of Fisheries Criteria has
kicked off again – we had a break indevelopment while wrapping up Marine
Renewables. We’re hoping to push thisforward and draft Criteria should be out
for public consultation in a few months.

The level of interest that public
consultation generated indicates that
we’ll be seeing certifications in this
sector before too long – watch thisspace!

The Criteria development process
is nearing completion and we are
currently reaching out to experts in the
Waste Management sector to join the
Industry Working Group. This group will
review the draft Criteria and provide
their feedback over a series of meetings.

This process is expected to take one
month and will be followed by public
consultation.

Bioenergy

Hydropower

Buildings

Status: just closed
public consultation

Status: public
consultation imminent

Bioenergy Criteria
has also recently gone through public
consultation. These Criteria coverbioenergy for electricity, heating &cooling, and transport and has twocomponents: mitigation and adaptation& resilience.

We will be releasing
Hydropower Criteria for public
consultation in Q3 2018. The TWG has
been working diligently since June 2016
to develop robust Criteria.

Status: Criteria
published,
continually expanding

EV-to-grid applications and pumped
storage (hydropower) are out of scope.

Waste
Management
Status: TWG
developing Criteria

The mitigation component requiresa GHG threshold, set at a level thatindicates the energy produced isaligned with 2˚C warming, is met. The
adaptation & resilience component
checks that issuers have identified andaddressed climate risks. Issues suchas food security and indirect land use
impacts are also covered.
Issuing a bioenergy-related green bondand want to become certified? Find out
more on the Bioenergy Criteria here.

H1 2018 ISSUE 7

The Hydropower Criteria encompass
three types of requirements: Mitigation;
Adaptation & Resilience; andEnvironment, Social and Governance(ESG). The mitigation component
sets thresholds and Criteria for net
emissions of the facility while theadaptation and resilience component
requires hydropower facilities toaddress resilience to climate change
impacts. The third component identifies
any significant gaps that the facility
demonstrates against international
good practice across the full range of
ESG topics.

If you or someone from yourorganisation is interested in joining theIndustry Working Group, please contact
Cory.

As the Building Criteria is location
specific, it requires ongoing research anddevelopment of localised low carbon
trajectories and market performanceproxies. We are excited to announce
several markets have been or are soon
to be unlocked using data provided by
local governments. These include; China’s
3-Star program, Norway, Belgium, South
Korea, Mexico City, Tokyo and Seattle.
For a full list of trajectories and proxies
available, see the relevant criteria page.
In addition to these updates, we’re
working to provide a range of guidance
documents, including easy to readmethodologies for establishing new
proxies, a Q&A and updated Criteria
documents to make issuance as
streamlined as possible.

PAGE 6

Snapshot of Certified Climate Bonds
H1 2018: January - June 2018
USA

Germany

NorwayChina

Total issued:

Total issued:

Total issued:

Total issued:

$303m

$463m

$3bn

$2.6bnNetherlands

Belgium

Australia

New Zealand

Total issued:

Total issued:

Total issued:

Total issued:$1.6bn$575m$1.3bn$137m

Full details of all Certified Climate Bonds can be found on our website.

Meet the Climate Bonds Standard & Certification teamAnna Creed
Head of Standards

Ujala Qadir
Climate Standards Manager

Katie House
Research Analyst
Marine & Land Use

Cory Nestor
Research Analyst
Buildings & Waste

Sergiu Jiduc
Research Analyst
Grids & Agriculture

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 July 2018. Designed by Godfrey Design.

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H1 2018 ISSUE 7

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