WATERINFRASTRUCTURE
CRITERIA
Climate Bonds Standard
What are the Climate Bonds
Standard Water Criteria?

Why certify a water infrastructure relatedbond using the Climate Bonds Standard

The Water Criteria lay
out the requirements thatwater infrastructure assets
and/or projects must meet to be eligible
for inclusion in a Certified Climate Bond.
The bond must also meet the reporting
and transparency requirements of theoverarching Climate Bonds Standard V3 inorder to receive Certification. This document
gives an overview of the Criteria; for fulldetails see the Criteria Document.

Certification allows issuers to demonstrate
to the market that their bond meets
industry best practice for climate integrity,management of proceeds and transparency.

What underpins the Criteria?
The guiding principle for the Climate Bonds
Standard is that certified assets and projects
must be in line with limiting global warming
to no more than 2˚C, ideally no more than
1.5˚C, and support climate resilience of theasset and surrounding environment.
The Criteria embed transformative steps
for rapid decarbonisation not incrementalimprovements.

It indicates to investors that proper environmental
due diligence has been done on the assets.
This enables them to easily identify and invest
in low carbon and climate resilient water
infrastructure assets/projects with genuine
climate benefits. This is particularly important
for water infrastructure, as the climate risks
and opportunities are myriad and complex.
Ensuring water infrastructure is climate resilientand does not impinge upon the resource
security and availability for all stakeholders iscritical. Moreover, evaluation is multi-facetedand simple metrics cannot be used.
Other benefits of issuing a Certified Climate
Bond include; investor diversification (waterissuers should find they attract new investors bycertifying), greater investor engagement, investor
stickiness (investors buying Certified Climate

Bonds tend to buy and hold), strengthened
reputation (certifying shows commitment todelivering low carbon infrastructure) and afreeing up of balance sheets.
How will the Criteria assist in growing thegreen bond market?
The rapid growth in the green bond market
over the past 3 years has been met withquestions around the environmental claimsof the bonds, and about what assets are
suitable for inclusion in a green bond.
The Water Criteria indicate to potential
issuers and the market what types of waterprojects should be included in green bonds.
They define what low carbon and climate
resilient water infrastructure is.
Green bonds invested in water assets or
projects reached USD7.4bn outstanding in
2016; the issuance has increased from 9%
in 2015 to 14% in 2016, and further growthis expected. So far, around USD9bn worthof green bond issuance has been certified
under the Water Criteria.

Will your project meet the Water Criteria? It’s an easy two-stepSTEP1STEP2

Comply with
Mitigation
Component

Comply with
Adaptation &Resilience Component

Water projects either
decrease or do not increase
GHG emissions from abusiness-as-usual baseline
over the operational lifetimeof the water asset or project.
For desalination plants, meet a
low carbon energy threshold.

Water infrastructure and its
surrounding ecosystem areresilient to climate change, andhave sufficient adaptation toaddress climate change risks.
To demonstrate that, issuers
should complete a scorecard
made up of six sections:

Section 1. Allocation: Addressing how water is shared by userswithin a given basin or aquifer.
Section 2. Governance: Addressing how/whether water will beformally, negotiated, and governed.
Section 3. Technical Diagnostics: How/whether changes to thehydrologic system are addressed over time.
Section 4. Nature-based Solutions: (for nature-based and hybrid
infrastructure only) addressing whether issuers have sufficientunderstanding of ecological impacts at/beyond project site withongoing monitoring and management capacity.
Section 5. Desalination Plants: (for desalination plants only)
addressing whether specific A&R issues for desalination havebeen addressed.
Section 6. Assessment of the Adaptation Plan: Checking thecompleteness of the coping mechanisms to address identified
climate vulnerabilities.

Introduction to the Water Infrastructure Criteria Climate Bonds Standard 2021

PAGE 1

The Criteria apply to a variety of water
infrastructure assets and projects
Modern and developing economies ‘float’on water resources. Water infrastructure
functions and associated assets and projects
addressed by the Water Criteria include: water
capture and collection, water storage, watertreatment, flood defence, drought defence,storm water management, and ecologicalrestoration/management.
The Water Criteria also cover grey, or built
water infrastructure such as desalination
plants, and nature-based water infrastructure,recognising that ecosystems (including
rivers, lakes, natural watersheds, aquifers
and groundwater) are the original water
infrastructure and are increasingly being
integrated within formal water management
systems as green and hybrid infrastructure.
Why the two components: mitigation, andadaptation & resilience?
Water has a deep connection to carbon
emissions and can contribute to acceleratingor mitigating climate change. For instance,water often needs to be moved or transferred
long distances and pumped from groundwateror from storage sites to consumption points– all of which can be energy intensive. Water
treatment such as effluent treatment anddesalination can be especially ‘thirsty’ forenergy. Therefore, efforts to reduce theenergy consumed and/or the amount of water
treated or moved can all have very significant
impacts on greenhouse gas emissions.

Climate change presents significant
challenges for water management,
not least because of the diverse andmultiple demands made upon
freshwater resources, and changing
hydrological conditions due to climatechange. At the most basic level,climate change means that water
quality, quantity, and availability are
evolving and will likely continue to doso for decades or centuries. Moreover,the nature, scale and timing of theseevolutions is highly uncertain. To ensure
an effective adaptation of existing systemor building resilient new systems isessential given the fundamental basisof water in modern economies.

The Adaptation & Resilience Component:
assets need to be resilient and responsive
to ecosystem and wider stakeholders
This component assesses how the issuer has
ensured the asset’s own resilience to climatechange, and addressed its impact on otherstakeholders’ resilience to climate change interms of their access to water in sufficientquantity and quality.
Issuers are required to have assessed
the climate risks of their assets and thesurrounding system the project is exposedto through a Vulnerability Assessment, andwhere needed, establish an Adaptation Plan
to address any climate vulnerabilities thathave been identified.

The Mitigation Component: green energy
thresholds for desalination, no increase ofGHG emissions for everything else

The efficacy and thoroughness of the issuer’s
Vulnerability Assessment and Adaptation
Plan are evaluated by a Scorecard, or checklist,
consisting of a series of binary questions.

This intends to provide transparency over thedegree of mitigation that will be delivered
over the operational lifetime of the projector asset.

The Criteria are developed by leaders in thewater sector

Issuers must disclose and justify that
their water assets or project do not increase
GHG emissions compared to a business-asusual baseline. Desalination plants differ inhaving specific thresholds they must meet.

We convened a Technical Working Group(TWG) and an Industry Working Group(IWG), to develop the Water Criteria. We
worked closely with the TWG to develop theseCriteria based on their expertise. The IWG
provided feedback on the Criteria proposed.

The Water Criteria will be revised andrefined over time. The mitigation component
will be adjusted as more information
becomes available to set emissions thresholdor efficiency improvement targets.

Current leaders from 50 organisations acrossthe academic, NGO, issuer, investor andverifier worlds were also represented acrossthe two groups. Full membership details canbe found on our website.

Technical Working Group and Industry Working Group
members include:

Further information sources
Want to certify, or just know more?
Take a look at these documents:
1. The Water Criteria document full
requirements of the Criteria
2. The Water Background Paper
full details of the TWG and IWG
discussions
3. Frequently Asked Questions (FAQs)
4. Water Criteria Guidance to Issuers
and Verifiers illustrative examples toassist in demonstrating compliance
5. Climate Bonds Standard V3 full
requirements of the Climate Bonds
Standard
Go to www.climatebonds.net
Or email chris.moore@climatebonds.net

Full member list can be found on our website.
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 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 ClimateBonds Initiative is not endorsing, recommending or advising on the merits or otherwise of any investment 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. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind, for any investment anindividual 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 BondsInitiative public communication. © Climate Bonds Initiative 2021

Introduction to the Water Infrastructure Criteria Climate Bonds Standard 2021

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