Buildings Criteria - Background Paper
The Buildings Eligibility Criteria of the Climate
Bonds Standard & Certification Scheme

Updated: September 2023

NOTE:

These Criteria can be used to certify Use-of-Proceeds Instruments and Assets, and also in somecircumstances, Sustainability-Linked Debt Instruments and Entities per the Climate Bonds
Standard v4.0

Revision

Date

Summary of Changes

Rev. 2.1

September 2023

Issued for public review. Updates to New Buildings to include
embodied carbon, GHG assessment rules and alignment with the EU
Taxonomy and alignment with 1.5-degree pathway

Rev. 1.1

13 April 2023

Revisions to enable Entity Certification and SLD Certification in linewith release of CBS v4.0

Rev. 1.0

July 2022

Final for IssuanceClimate Bonds Initiative - Buildings Criteria - Background Paper Document
Updated: September 2023

Acknowledgements
Climate Bonds gratefully acknowledges the Technical and Industry Working Group members who
provided their time and expertise during the development of these Criteria. Members are listed inAppendix A: TWG and IWG members at the end of this document.
Special thanks are given to Ché Wall of Flux Consultants the lead specialist co-ordinating thedevelopment of the Criteria through the Technical Working Group.

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Definitions
Applicant: The term or name for any potential bond issuer, or non-financial corporate entity that might seek certification under the
Buildings Criteria.
Capital Expenditure (CAPEX): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants,buildings, technology, or equipment.
Certified Entity: The entity or part thereof which is being certified under the Climate Bonds Standard. Currently, Entity Certification
is limited to non-financial Entities or segregated segments thereof, for which the Climate Bonds Initiative has Climate Bonds
Standard Sector Criteria for Entity Certification.
Climate Bonds Initiative (Climate Bonds): An investor focused not-for-profit organisation, promoting large-scale investments thatwill deliver a global low carbon and climate resilient economy. Climate Bonds seeks to develop mechanisms to better alignthe interests of investors, industry and government to catalyse investments at a speed and scale sufficient to avoid dangerous
climate change.
Climate Bonds Standard (CBS): A screening tool for investors and governments that allows them to identify green bonds theproceeds of which are being used to deliver climate change solutions. This may be through climate mitigation impact and/or
climate adaptation or resilience. The CBS is made up of two parts: the parent Climate Bonds Standard and a suite of sector
specific eligibility Criteria. The parent standard covers the certification process and pre- and post-issuance requirements for
all certified bonds, regardless of the nature of the capital projects. The Sector Criteria detail specific requirements for assets
identified as falling under that specific sector. The latest version of the CBS is published on the Climate Bonds website.
Climate Bonds Standard Board (CBSB): A board of independent members that collectively represents $34 trillion of assets undermanagement. The CBSB is responsible for approving (i) Revisions to the CBS, including the adoption of additional sector
Criteria, (ii) Approved verifiers, and (iii) Applications for Certification of a bond under the CBS. The CBSB is constituted,
appointed, and supported in line with the governance arrangements and processes as published on the Climate Bonds website.
Climate Bond Certification: allows the applicant to use the Climate Bond Certification Mark in relation to that bond. Climate Bond
Certification is provided once the independent CBSB is satisfied the bond conforms with the CBS.
Commercial building: A building that is intended to generate a profit, either from capital gain or rental income. There are subcategories of Commercial Buildings, including offices, shopping centres and hotels.
Critical interdependencies: The asset or activity’s boundaries and interdependencies with surrounding infrastructure systems.
Interdependencies are specific to local context but are often connected to wider systems through complex relationships that
depend on factors ‘outside the asset fence’ that could cause cascading failures or contribute to collateral system benefits.
Energy Efficiency: A term used to describe reduction in energy required to provide products and services
Emissions Factor: A term used to describe GHG emissions intensity of the energy consumed in a building. For electricity, locationbased factors must be used. Where available, users (customer) mix Emissions Factors must be used. Market methods andpurchase of off-site green power are not considered.
Emission Performance: A term used to describe emissions intensity and associated emissions reductions of a building. This isexpressed in terms of kg of CO2e per square meter determined from total emissions divided by net lettable floor area.
Emissions Intensity: A quantitative figure expressed as kgCOe/ m2, or kgCO2e/sq2.
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Emissions Performance Target: A quantitative emissions intensity figure falling on or below the emissions performance trajectoryand is expressed as kgCO2e/ m2 or kgCO2e/sq2
General Corporate Purpose Bond: a bond the proceeds of which are not ringfenced for specific assets or activities, but which financegeneral OPEX and CAPEX of a company without disclosing the exact uses. SLBs are examples of general corporate purpose
bonds.
Green Bond: A green bond is a bond of which the proceeds are allocated to environmental projects or expenditures. The term
generally refers to bonds that have been marketed as green. In theory, green bonds proceeds could be used for a wide varietyof environmental projects or expenditures, but in practice they have mostly been earmarked for climate change projects.
Industry Working Group (IWG): A group of key organisations that are potential applicants, verifiers and investors convened by
Climate Bonds. The IWG provides feedback on the draft sector Criteria developed by the TWG before they are released for
public consultation.
Investment Period: The interval between the bond’s issuance and its maturity date. Otherwise known as the bond term or tenor.
Net-zero: Net zero-carbon buildings are understood as highly energy-efficient buildings, in which CO2 emissions from all operationalenergy consumed over the course of a year are balanced out to reach zero through renewable and/or other zero-emission
energy supply.
Net-zero ready: Net zero ready buildings meet the definition of (fully) a net zero building (e.g. efficiency, electrification andembodied carbon targets) but are waiting on the decarbonisation of the electrical grid supply (scope 2).
Operating Expenditure (OPEX): Expense a business incurs through its normal business operations. Often abbreviated as OPEX,
operating expenses include rent, equipment, inventory costs, etc.
Residential building: A building that is used or suitable for use as a dwelling.
Sustainability-Linked Debt (SLD): Any debt instrument for which the financial and structural characteristics can vary depending onwhether the issuer achieves predefined Sustainability/ ESG objectives. Such objectives are measured through predefined KPIs
and assessed against predefined performance targets. Proceeds of SLD are intended to be used for general purposes.
Technical Working Group (TWG): A group of key experts from academia, international agencies, industry and NGOs convened by
Climate Bonds. The TWG develops the Sector Criteria - detailed technical criteria for the eligibility of projects and assets aswell as guidance on the tracking of eligibility status during the term of the bond. Their draft recommendations are refined
through engagement with finance industry experts in convened Industry Working Groups (see below) and through public
consultation. Final approval of Sector Criteria is given by the CBSB.
Use-of-Proceed (UoP) Bond: a bond the proceeds of which are ringfenced for specific assets and activities. Green bonds, blue
bonds, and transition bonds are examples of UoP bonds.
Whole Life Carbon Assessment (WLCA): an assessment of the sum total of all building-related emissions over a building's entire life.

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Table of Contents
Definitions

3

1

7

2

3

Introduction
1.1

Overview

7

1.2

Funding the goals of Paris Agreement

7

1.3

The role of bonds

7

1.4

Introduction to Climate Bonds Standard

8

Sector Overview
2.1

The Buildings sector in a Climate Compatible Future8

2.2

Future of Buildings

9

2.3

Buildings sector scope

10

2.3.1

PRINCIPLE: Compatibility with a 1.5 or 2-degree future

10

2.3.2

Focus on emissions, not energy

10

2.3.3

Focus on landlord, not tenant

11

Metrics, tools, and indicators for climate compatibility
3.1

4

5

8

13

Establishing low carbon trajectories

13

3.1.1

Why established on a city-by-city basis?

14

3.1.2

Why start the trajectory from the top 15% of the market

14

3.1.3

Why a linear trajectory

15

3.1.4

Expanding the pool of low carbon trajectories via data interpolation

15

3.1.5

Alternatives in practice

16

3.1.6

Asset pools to which these should be applied

17

Assets Standards for Financing with a 1.5-Degree World

18

4.1

Compliance standards

18

4.2

What is new in the Low-carbon Buildings Criteria

18

4.3

Whole Life Carbon Assessment

19

4.3.2

Why net-zero ready or net-zero compliance

19

4.3.3

Role of hydrogen in Buildings

20

4.3.4

Electrification of Buildings

21

Reporting and Accounting on Embodied Carbon and GHG Scope 3 emissions
5.1

22

Whole Life Carbon Assessment and Embodied carbon

22

5.1.1

Background

22

5.1.2

Scope of WLCA in New Buildings Criteria

22

5.1.3

Reporting on Whole life carbon assessment in Climate Bonds Low-carbon Buildings criteria for New Buildings

24

5.1.4

What is Whole Life carbon assessment?

24

5.1.5

Scope of the WLCA

24

5.1.6

Process and structure of undertaking a WLCA

24

5.1.7

Undertaking WLCA key project phases

25

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5.1.8

Recommended steps to complete a WLCA

26

5.1.9

Supporting framework for conducting WLCA

26

5.1.106

Types of projects included in the Climate Bonds Buildings Criteria

27

5.2

Area measurement

28

5.3

Material Quantity

29

Guide to Scope 3 Accounting and Reporting
6.1

Background

30
30

6.1.1

What is GHG accounting?

30

6.1.2

GHG Accounting in the real estate sector

30

6.1.3

Corporate GHG protocol standard

30

6.1.4

Overview of Scope 3 categories

32

6.2

Defining the categories of the building and construction system

33

6.3

Guidance for reporting and accounting under the Climate Bonds Low carbon Buildings Criteria

34

6.3.1

Building value chain and their intended users

34

6.3.2

Intended users and their relevant target categories

35

Appendix A: TWG and IWG members

37

List of Figures
Figure 1: Split of Global Building-related Emissions
Figure 2: Emissions embedded in energy and energy efficiency
Figure 3: Converting final energy demand to carbon dioxide equivalent emissions
Figure 4: Example structure of a low carbon trajectory
Figure 5: Building Sector Final Energy Demand in 2050
Figure 6: Trajectory and proxy pathway
Figure 7: Upgrade and net zero emissions
Figure 8: Embodied Carbon lifecycle of a building
Figure 9: Scope of WLCA under Climate Bonds Initiative low-carbon Buildings criteria
Figure 10. Building life cycle stages and information modules
Figure 11. Recommended steps to complete a WLCA
Figure 12: Life cycle stages of an asset
Figure 13: Sub-modules of module A5
Figure 14. Overview of GHG protocol scopes and emissions across the value chain
Figure 15. Categories of the building and construction system
Figure 16. Value chain of building and construction system

9
11
12
13
14
18
18
22
23
25
26
27
28
31
34
34

List of Tables
Table 1: Source of material quantities to be used at each phase for WLCA
Table 2. Scope 3 Categories (adapted from GHG Protocol)
Table 3: Description and minimum boundaries
Table 4: Alignment of intended users within the Building value chain
Table 5: Scope categories and target categories
Table 6: Relation between Life Cycle Stages and GHG Protocol Categories

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29
32
32
35
35
36

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1 Introduction
1.1 Overview
This document serves as a reference document to the Criteria Document for the Low-carbon Buildings. The Criteria are developed
through a consultative process with Technical Working Groups (TWGs) and Industry Working Groups (IWGs), and through public
consultation. The TWGs comprise academic and research institutions, civil society organizations, multilateral banks, and specialist
consultancies whereas IWGs are represented by industry experts including potential bond issuers and investors. A period of public
consultation offers the opportunity to any member of the public to comment on the Criteria.
Buildings-specific information to support Applicants and Verifiers is available at Buildings as follows:•

Buildings Criteria Brochure.pdf (climatebonds.net) a 2-page summary of the Building Criteria•

Background Paper the rationale behind the Building Criteria•

FAQs (FAQ’s)•

Methodology for Establishing Low Carbon Trajectories: a guidance document for developing thresholds in new markets.

•

Methodology for Establishing Proxies: a guidance documents for developing proxies in new markets.

•

Methodology for Calculating Emissions Retrofits: a guidance documents for determining the emissions upgrade
requirement.

In addition, the following cross cutting information to support Applicants and Verifiers is available as follows:•

The Climate Bonds Standard v4.0: contains the requirements of the overarching CBS•

The Climate Bonds Standard v4.0 Entity and Sustainability-Linked Debt Checklist documents: provides further informationon the cross-sectoral requirements for Entity and Sustainability-Linked Debt Certification respectively.

For more information on Climate Bonds and the Climate Bonds Standard and Certification Scheme, see www.climatebonds.net.

1.2 Funding the goals of Paris Agreement
The current trajectory of climate change, expected to lead to a global warming of 2.7 - 3.1°C by 21001, which possess an enormousthreat. As part of the Paris Agreement, the international community committed to limit the global average temperature to no morethan 2-degree C above pre-industry levels, and to pursue efforts to limit it to no more than 1.5-degree C. The effects of climatechange and the risks associated even with a 1.5°C rise is significant: rising sea levels, increased frequency and severity of hurricanes,
droughts, wildfires and typhoons, and changes in agricultural patterns and yields. Meeting the 1.5°C goal requires a dramatic
reduction in global greenhouse gas (GHG) emissions.
In 2021, investments in building energy efficiency increased by 16% to USD 237 billion, but growth in floor space outpaced efficiency
efforts. Rapidly reducing greenhouse gas emissions in the buildings sector will be critical, given that it is estimated to account for
approximately one-third of the anthropogenic emissions globally at present.

1.3 The role of bonds
The need to invest in climate action is widely recognised. Various agencies have estimated the amount of investment needed by
sector and technology, released as investment roadmaps2 Today, the capacity of government to directly fund the transition to a
low-carbon economy is limited, but the world has deep capital resources.

1 According to Climate Tracker, under current policies we could expect 2.7 - 3.1°C (Temperatures | Climate Action Tracker)
2 Advancing the Green Development of the Belt and Road Initiative (2022) (WEForum.org)

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However, the development of investment and financing roadmaps is required at all levels, by a wide variety of stakeholders. This
includes commercial real estate funds and organisations looking to finance their activities and assets. It includes governments
looking to turn their National Development Strategies into investment plans and finance strategies. It includes a variety of public
entities looking to finance their own activities and assets and support the private sector to do so via appropriate policy and fiscal
support.
The IEA estimates that total investment in the global buildings sector must increase from USD 4.9 trillion to approximately USD 5.4
trillion in 2050 to limit global warming to well below 1.5°C. It is crucial for the bond market to play a critical role in this transition.
Currently Green Bonds only account for less than 0.2% of a global bond market of USD128 trillion 3. This is most notable when looking
at the current scale of green bond oversubscription. Without increased efforts to provide visibility on financing needs, issuers risk
missing the opportunity to align assets under management with climate compatible scenarios and investors risk investing inincremental and unsustainable efforts.

1.4 Introduction to Climate Bonds Standard
Activating the mainstream debt capital markets to finance and refinance climate friendly projects and assets is critical to achieving
international climate goals, and robust labelling of green bonds is a key requirement for that mainstream participation. Confidence
in the climate objectives and the use of funds intended to address climate change is fundamental to the credibility of the role thatgreen bonds play in a low carbon and climate resilient economy. Trust in the green label and transparency to the underlying assets
are essential for this market to reach scale but investor capacity to assess green credentials is limited. Therefore, Climate Bonds
created the Climate Bonds Standard & Certification Scheme, which aims to provide the green bond market with the trust andassurance to achieve the required scale.
Investor demand for Green Bonds & Climate Bonds is strong and will increase in line with the delivery of quality products into themarket. Standards, assurance & certification are essential to improved confidence and transparency and enabling strong growth in
the market. The Climate Bonds Standard and Certification Scheme is an easy-to-use screening tool that provides a clear signal toinvestors, asset owners, portfolio managers, and intermediaries on the climate integrity of Certified Climate Bonds.
A key part of the Climate Bond Standard and Certification Scheme is the overarching ‘Climate Bonds Standard’ available atwww.climatebonds. This documents the common fund management and reporting requirements that any and all Certified Climate
Bonds must meet. Also important is the complementary suite of sector-specific eligibility Criteria. Each set of Criteria establishes
climate change benchmarks for that sector. They are used to screen assets and capital projects so that only those that have climate
integrity, either through their contribution to climate mitigation, and/ or to adaptation and resilience to climate change, will becertified.
Existing Sector Criteria cover solar energy, wind energy, marine renewable energy, geothermal power, buildings, transport (landand sea), bioenergy, forestry, agriculture, waste management and water infrastructure, hydropower, electricity grids and storage,
Cement and Steel. Additional Sector Criteria currently under development include Hydrogen.

2 Sector Overview
2.1 The Buildings sector in a Climate Compatible Future
Buildings meet a range of occupancy demands, providing everything from an individual’s housing need to a business’s commercial
space. At present, there are over 400 billion square meters of gross floor area globally, three times as large as New York State. Thesebuildings account for roughly 30% of global final and 40% of primary energy consumption.
The building sector represents one of the largest contributors to climate change, both on a local and global level. The good news isthat there is vast potential for cost-effective mitigation through proven demand reduction and energy efficiency technologies.

3 Bond Market Size » ICMA (ICMAgroup.org)

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Unfortunately, the current level of global investment in emissions efficiency in the buildings sector still falls far short of what isrequired to achieve mitigation goals for a 1.5°C scenario.
Whether new construction or existing buildings, all buildings are comprised of a combination of structural, mechanical, andoperational strategies, together providing the building’s end-use service, and determining its energy demand. The delivery of these
services currently depends on the on-site (direct) input of energy via a range of fuel types and off-site (indirect) grid electricity.

2.2 Future of Buildings
The World Bank’s Climate Change Action Plan recognizes that cities will be key for this transition to a low-carbon, sustainableeconomy. The plan aims to direct 35 percent of financing to climate on average, with half of its climate finance supporting
adaptation and resilience and all financial flows in line with the Paris Agreement by 2025.
Taking the urban housing, for example. Residential buildings account for nearly three-fourths of global building energy use. Because
two-thirds of the buildings standing today will still exist in 2050, even small investments in energy-efficient retrofits could cut energy
costs by billions of dollars and greatly reduce emissions. At the same time, promotion of green buildings is crucial to improve thequality of life and protect natural resources. Green buildings can help businesses lower utility costs, cut construction spending, andmay lead to higher property value. They can also have a positive impact on the environment by generating their own energy or
increasing biodiversity.
The need for decarbonisation strategies is growing. Figure 1 illustrates the relative potential of four key strategies: energy efficiency
in new buildings, deep retrofits for energy efficiency in existing buildings, ensuring low GHG grids for indirect energy supply, andthe use of low GHG materials in building materials. Of course, given the complexity of the energy demand, distributed nature of theassets, and disaggregated structure of the industry, in practice the relative importance of these decarbonisation strategies will behighly site or asset specific.
Figure 1: Split of Global Building-related Emissions

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2.3 Buildings sector scope
The Buildings Criteria are made up of several complementary parts. These reflect appropriate groupings of assets in this sector, as
green bonds are linked to eligible assets and use of proceeds. These are:•Commercial Buildings, i.e., buildings that are intended to generate a profit, either from capital gain or rental income. There
are sub-categories of Commercial Buildings, including but not limited to, offices, shopping centres and hotels.

•

Residential Buildings, i.e., buildings that are used or suitable for use as a dwelling.

•

Public Spaces, this includes projects and assets that are not specifically buildings related, but are part of the wider built
environment, such as street lighting upgrade projects or residential block projects.

2.3.1 PRINCIPLE: Compatibility with a 1.5 or 2-degree future
The Building Criteria relies on scientifically derived climate scenarios and associated transition roadmaps and carbon budgets todetermine what level of performance required in and by the building sector. Working within this climate-science framework ensures
not only that all actors and assets in the building sector play their part, but also that each part adds up to the necessary rate andvolume of decarbonisation called for in the global carbon budget.
In this context, in 2013 when the Criteria were developed, it was determined that aiming for zero-carbon emissions across thebuildings sector by mid-century would ensure a level of carbon mitigation necessary to stay below the 2-degree warming threshold.
This rate of decarbonisation was first proposed by the Potsdam Institute and has since been expanded upon by many others
including the IEA and the IPCCs in the World Energy Investment 2016 and Climate Change 2014 reports respectively. These later
efforts continue to refine more specific targets by building typology (commercial, residential) and stage of investment (newconstruction, existing asset).
Therefore, the current Buildings Criteria aim to ensure that buildings related assets included in Certified Climate Bonds arecompliant with emissions trajectories compatible with net zero carbon emissions by 2050. These trajectories represent the rapid
decarbonisation paths required to ensure the 1.5-degree Paris Agreement and provide a structure for the improvement or transition
pathways that need to be rolled out across the buildings sector. Importantly, they also recognize that zero net energy buildings are
not currently technically feasible at scale at floor space ratios typical in urban centres.
In addition, these ambitious, but necessary target trajectories can also be used to identify performance gaps or target misalignment
in existing mandatory or voluntary building codes.
The Climate Bonds Initiative continues to conduct assessments of developing building sector modelling in order to ensure future
Criteria are in-line with the latest science.

2.3.2 Focus on emissions, not energy
There are currently efforts underway to track building performance including via; energy use (MW/year), EUI or energy use intensity(kWh/m2/year), emissions produced (kgCO2e/year) and emissions intensity (kgCO2e/m2/year).
However, measuring what matters remains a missing step in aligning the climate science and investment and financing roadmaps
with asset owners and investors. The building sector has made progress institutionalising building performance by measuring energy
use intensity (EUI). Some have gone so far as to measure both site and source EUI to track energy efficiency both at the site as wellas across the entire energy supply chain (source). While increases in energy efficiency and therefore reductions in a buildings energy
use intensity (EUI) can reduce emissions intensity of a building, EUI reduction does not consider the underlying fuel’s emission
intensity going to supply the assets energy demand. Figure 2 highlights the integrated natural of emissions within an energy supply
system.

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Figure 2: Emissions embedded in energy and energy efficiency

Note:

The useful energy demand of a building asset has in it,varying proportions of emissions dependent on thecomposition of the energy source and end-use
technology on-site (Source: Buildings | Climate Bonds
Initiative)

The building sector’s diverse use of direct and indirect fossil fuel, both on-site and offsite, requires a metric that allows crosscomparison of assets from a holistic, climate impact perspective. The traditional energy use intensity (EUI) metric used by theindustry is unable to measure climate impact effectively.
As energy is not all equal regarding emissions, it is necessary to measure emissions directly to both account for high performers andidentify assets ripe for improvement. A focus on emissions can also help uncover opportunities for fuel switching, where assets canimprove their emissions intensity by say, moving from direct combustion for heat to indirect electricity from a decarbonised grids
to run a heat pump. The current EUI metric does not reward this type of activity, which is critical to rapid decarbonisation in thebuilding sector.
For this reason, the Climate Bond’s Building Criteria’s preferred unit of measurement is emissions, and more specifically emissions
per square meter (emissions intensity). The metric sends a strong signal to investors, asset owners and developers of building
standards and codes that emission is the metric to measure.
In practical terms, this includes the following scope of emissions, as defined in the Greenhouse Gas Protocol methodology.
•••

Scope 1 - direct emission sources from buildings including the energy conversion-through-combustion of fossil fuels suchas natural gas, fuel oil, biomass and in some cases coal on-site. Other types of direct emissions such as refrigerants are notcurrently required.
Scope 2 - indirect emissions sources from building including the energy conversion-through combustion of fossil fuels suchas coal, oil, and natural gas, AND/OR the emissions associated from non-fossil fuel such as nuclear and renewables (whensubstantial enough i.e., reservoir emissions from hydro) when providing electricity and/or district heating/cooling to thebuilding.
Scope 3 - indirect emissions sources associated with the sourcing, transmission, and distribution of energy to the building.
Other scope 3 emissions from transport, waste, and water are not currently incorporated.

2.3.3 Focus on landlord, not tenant
In addition to considering the scope of emissions in which to account for, there are also boundaries within a given building asset.
The two most common boundaries are the “Base Building” and “Whole Building”.
••

Base Building reporting includes only the emissions production typically under the control of the landlord or asset owneri.e. the heating, hot water, ventilation and air-conditioning of the whole building, light and power in common areas, andthe lifts.
Whole Building reporting includes both the emissions production under the control of the landlord (or asset owner) andthe tenant, i.e., tenant lighting, office equipment, etc.

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Benchmarking regulations and demand from investors for more transparent reporting is driving increased sub-metering of buildings,
effectively delineating whole building reporting into base building and tenant energy and emissions. All forms of building
performance benchmarking should be actively encouraged, including both base and whole building. Long-term, increased demand
from tenants for high-performance buildings will require tenant level performance tracking and therefore, whole building with submetering is ideal when considering future demand growth in this area.
That said, currently the Buildings Criteria focus on the emissions associated with energy use within the control of the landlord i.e.
base building services also known as “core and shell.”
The reasons for this are that:••••

Light, power, and miscellaneous end-use energy demand within tenant spaces is outside the financial or management
control of the building owner.
Commercial buildings may experience a change in occupiers during the term of the bond.
Driving down end-use energy demand at the tenant level also benefits from a direct return on investment for a tenant,
These investments and energy reduction strategies are outside the control of the landlord who ultimately issues the bond.

Converting tenant energy use to scope 1 and 2 emissions
Converting energy use to emissions is a principal step in accurately accounting for an assets contribution to a climate compatible
future. While policy and regulation efforts continue to bridge these two performance tracking metrics, current efforts by issuers to
identify climate compatible asset is still a challenge. While various methods for converting energy use to emissions exists, theBuilding Criteria require accounting by final energy use. This is in line with ISO 16745-1:2017. Figure 3 above highlights themethodology used to account for differences in final energy demand and associated emissions (direct & indirect).
Figure 3: Converting final energy demand to carbon dioxide equivalent emissions

Note:

Buildings Criteria - Background Paper- Climate Bonds Initiative(1) Scope 1 and 2 emissions accounting does not require Life Cycle
Assessment (LCA).
(2) Scope 3 emissions accounting require such, as embedded
emissions in building materials DO requires an LCA model todetermine total embedded emissions.
(3) Building labelling schemes are bringing these efforts to themarket. Source: Buildings | Climate Bonds Initiative)

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3 Metrics, tools, and indicators for climate compatibility
3.1 Establishing low carbon trajectories
the overarching objective of the Buildings Criteria is to establish emissions trajectories compatible with net zero carbon emissions
by 2050, so that only buildings performing within these trajectories would be eligible for inclusion in a Certified Climate Bond. Below
are the principles used to establish the Building Criteria Emission Trajectory.
Net-zero-carbon trajectories are established by drawing a linear line between the emissions performance of the top 15% of therelevant market (residential, non-residential) ‘today’ and the net zero-carbon target for 2050. Notably, these trajectories are
established on a city-by-city basis, rather than a single global trajectory. Figure 4 illustrates this approach.
The simplicity of this approach enables rapid screening and meaningful monitoring and verification for assurance withouttransaction costs undermining any price benefit green bonds may offer. The Criteria has been designed with an ambition of a zerocarbon future in 2050 and offers a pathway to reach that outcome in a manner bespoke to each city’s present circumstance. It aims
to leverage the best data available to establish appropriate emission intensity baselines and offers an alternative pathway wherelack of data prevents reliable market insight.
Figure 4: Example structure of a low carbon trajectory

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3.1.1 Why established on a city-by-city basis?
Figure 5 below highlights the range of final energy demand across regions broken down by end use service (i.e., heating, cooling,lighting) and the required reductions determined by the IEA to meet a 2-degree scenario.
Figure 5: Building Sector Final Energy Demand in 2050

Source:Map provided by IEA Energy
Dashboard)

The variability illustrated by region is indicative of a broader point: that there are a variety of local characteristics that may influenceemissions intensity in the buildings sector. These include:••••

Local climate, such as daily and seasonal temperature and weather patterns which affect demand for lighting, heating andcooling etc
Local grid mix and associated emissions intensity of off-site energy. Box 6 explores the impact of these factors in moredetail.
Local building characteristics that influence operational performance outcomes, such as the proportion of energy supplied
on-site and the fuel source for that energy.
Local occupancy use patterns.

Setting zero carbon trajectories on a city-by-city basis therefore ensures that buildings in locations where higher levels of energy
are needed to meet end-use need are not penalised. Instead, decarbonisation of energy as a means of achieving climate
compatibility is incentivised.

3.1.2 Why start the trajectory from the top 15% of the market
To ensure that Climate Bonds Certification achieves both significant scale and environmental impact, the starting emissions intensity
is established by the performance level of the top 15 percent of buildings in a city. The 15% was seen as the correct start position
based a need to balance the following:•
AppendixDesire to establish high standards of performance - requires very strict performance standard
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Need to create some opportunity in the existing market - so that best performers can be identified and certified, so longas they continue to improve their performance in line with the declining emissions trajectory.
Need to ensure that the resulting trajectories are aligned to the capacity of the market to deliver improved outcomes.

A market average approach was not adopted as this would arbitrarily permit 50% of the existing stock to qualify, and the Climate
Bonds Standard would then not meet its objective of ensuring signalling of assets with are compatible with the Paris Agreement.
An averaging across the market for the building stock, given the potential significant ‘legacy’ building stock that impacts the averageand the focus on asset level rather than portfolio level (as in the 1.5°C portfolio tool from the 1.5° Investing initiative, which applies
a market average), would have unduly skewed the eligibility of the building stock.

3.1.3 Why a linear trajectory
A linear trajectory puts in to place an early and rapid decarbonisation target. A concave trajectory would delay decarbonisation andrisk not meeting the stringent demands of a 2-degree scenario. A convex trajectory, by requiring too rapid decarbonisation, may
prevent the Building Criteria from gaining traction in the market and reaching significant scale and impact.
Recalibration
The “initial baseline emissions intensity” is established using available emissions intensity data of a representative sampleof buildings by category (residential, non-residential) in a city. The sample must be of sufficient size and cover a random
sampling of assets in the market. Once set, it is not expected to be updated unless in exceptional circumstances.
The two key circumstances that warrant a recalibration of initial baseline emissions intensity are••

when the size and quality of the underlying data set improves significantly andwhen there is significant decarbonisation of the grid.

The Climate Bonds Initiative will undertake a review every 3 years to check for these two circumstances and whether they
warrant a recalibration of initial baseline performance.

3.1.4 Expanding the pool of low carbon trajectories via data interpolation
The scarcity of reliable operational performance data for buildings in many parts of the world has been a significant limitation toestablishing low carbon emissions trajectories. Without this data, Climate Bonds Initiative is unable to determine overall market
performance needed to establish low-carbon trajectories in most locations. This has led to Climate Bonds being unable to certify
assets in many locations, and leaves investors with a lack of clarity of the climate performance of building assets in those locations.
A New Way Forward
A process has been developed to allow estimation of the baselines needed where operational performance data forbuildings of sufficient quality cannot be sourced for that location.
This means that Climate Bonds is now able to estimate market benchmarks with high confidence where the climatecharacteristics for that market are within the zones of climates associated with our established city baselines. In essence,
established benchmarks can be interpolated to similar climate regions currently not covered by Climate Bonds - so long as
the new location is within similar climatic zones regions as the established baselines.

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3.1.5 Alternatives in practice
Establishing emissions trajectories on a city-by-city basis requires robust buildings data for each city. This is often challenging toobtain.
The Climate Bonds Initiative has established alternative methods to determine whether an asset or portfolio is on a climate
compatible zero carbon trajectory, in instances where emissions trajectories cannot be reliably established for a given building typeand location.
Currently, support for two alternative methods to determine whether a building asset or portfolio is on a climate compatible zerocarbon trajectory exist.
••

Market Accepted Proxies
Significant Improvement from current performance•

Alternative 1: Incorporating Market Accepted Proxies
Globally, markets have begun to adopt a range of various building design, construction, or performance schemes. They
range from voluntary and mandatory national schemes such as Energy Star in the US and Energy Performance Certificatesin the EU to voluntary industry standards such as BREEAM and LEED. Many of these are well established in the market but
aimed at difference audiences such as developers.
As an interim solution, in markets where data challenges have meant that zero carbon trajectories cannot yet beestablished, the Climate Bonds Initiative looks to leverage these codes or schemes as proxies to demonstrate the necessarylevel of performance of the building’s assets in question.
Specifically, the Climate Bonds Initiative has established a framework to evaluate the compatibility of these schemes andstandards with the climate targets embedded in the Paris Agreement and the associated buildings emissions targets for
Certified Climate Bonds as described above. With this framework, the suitability of any given scheme or code can beassessed, and those that are compatible with delivering the emissions outcomes required can be adopted as a potential
performance proxy. Any building appropriately rated under that approved proxy is hence deemed climate-compatible andis eligible for certification under the Climate Bonds Standard. Importantly, as proxies are meant to serve as an interim
solution until data becomes available to establish a local zero carbon trajectories, a limit is placed on the term of bondsthat can be certified via a proxy. This ensures that green finance is not ‘locking in’ buildings that are not sufficiently low
carbon over the longer term.
Methodology for Establishing Building Proxies gives this assessment framework for building schemes or codes. It is
standardized to prevent unfair treatment across given performance standards as well as ensure reliability and crosscomparison on all Certified Climate Bonds and the underlying building assets.
The framework allows for two methods of assessment and are dependent of whether a city specific baseline has been
established.
••

Benchmarking against local market emissions performance
Benchmarking against proportion of total ratings/ labels awarded

Market accepted proxies, while having the benefit of increased adoption, are stationary benchmarks that undergo updating
and replacement over time. The performance dictates of these proxies also only meet compliance with the zero-carbon
trajectory over a limited period due to the declining nature of the trajectory.
To account for these two scenarios (outdating and no long compliance) the established proxies are earmarked for review
after a set period (expiration date), in this case, either a new proxy becomes available or the existing one has undergone
updating and compliance is maintained.
•

Alternative 2: Financing upgrade activity
This option has been included to allow financing of upgrade activity across a range of different asset types that might be
included in a bond, such as street lighting programmes and other public space renovations, or finance incentive schemes

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such PACE or ESCO. This option also captures buildings that may not be able to be refurbished to meet the zero-carbon
trajectory hurdle due to constraints such as heritage and historic protection orders. Significant improvements in emissions
intensity has been shown to achieve similar emissions reductions called for in the low-carbon trajectory.
To ensure a path to compliance exist for the entire buildings sector, a significant improvement pathway has been
determined as an alternative hurdle rate for eligibility for certification under the Climate Bond Standard.
This significant improvement is defined as a 30-50% improvement from current emissions performance. The exact
percentage depends on the term of the bond, i.e., how long green finance is being locked up for. For a 5-year bond, a 30%
improvement is required. For a 20-year bond, a 50% improvement is required. With a linear sliding scale between thesetwo points. 30% was established as the minimum expectation for GHG reduction from an upgrade based on building
components only, with no interruption to the building’s lifecycle. 50% was established as a reasonable reduction for therepositioning of a building that would requirement full refurbishment of plant and envelope. These bookends then set
against the short and long-term targets expected of bond issuance.

3.1.6 Asset pools to which these should be applied
Several assets are often included within a portfolio linked to a bond. To gain traction in the market, the Climate Bond Standard must
minimize transaction costs for issuers and make it as easy as possible for them to demonstrate compliance with the Criteria.
Therefore, to uphold the level of stringency required to ensure assets and portfolios are indeed aligned with zero carbon
trajectories, it is necessary to determine in what circumstances the Criteria could be applied and assessed at the portfolio level, as
opposed to separately for each asset within the portfolio. The approach taken on this is as follows:•

Method 1: Portfolio Aggregation
Where emissions intensity baselines are well established, properties across a portfolio compliant with the Climate Bonds
trajectory OR Climate Bonds approved proxy (building code, energy labelling scheme or rating tool) can be measured bytheir collective emissions intensity. Those portfolios (pooled assets) that meet a Climate Bonds approved compliancepathway are certified as a whole, known as the Full Aggregation or “area weighted approach.”•

Method 2: Individual Asset Verification
Where emission intensity baselines are not established, properties compliant with a Climate Bonds approved proxy(building code, energy labelling scheme or rating tool) must be compliant and only assets that meet the proxy requirements
can be pulled into a Certified Climate Bond. This is because certifying proxies assume an increase level of risk over a zerocarbon trajectory approach.

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4 Assets Standards for Financing with a 1.5-Degree World
4.1 Compliance standards
There are, in essence, two pathways to eligibility for inclusion of buildings in a Certified Climate Bond. These are:••Pathway 1: Compliance with the zero carbon emissions targets: Assets or portfolio MEETS or WILL MEET the zero emissions
trajectory or already meets the requirements of an approved proxy (refer to Figure 6), OR
Pathway 2: Upgrades: HAS or WILL achieve a significant improvement in emissions efficiency against an asset/portfolio
relative baseline (refer to Figure 7).

Figure 6: Trajectory and proxy pathway

Figure 7: Upgrade and net zero emissions

4.2 What is new in the Low-carbon Buildings Criteria
The focus of the existing Buildings criteria is reduction of emissions from the operational phase of a building’s life cycle. Theseemissions are influenced by the energy efficiency of the buildings, the sources of energy and intensity of use.
Previously, the Climate Bonds Low-carbon Buildings criteria did not have a separate definition for New Buildings. The new criteria
will now have a distinguishing definition for New Buildings. New construction is required to be delivered without the use of fossil
fuels and with infrastructure for electric mobility to ensure that built assets are net-zero ready without planned redundancy of plantor future investment requirements. Additionally, the New Buildings are also required to report and account for Whole Life Carbon
Assessment (WLCA), Please also refer to section 4.2.1 for requirements on the same.
Introducing a set of additional criteria for new buildings represents a significant step change for the buildings criteria in the Climate
Bonds Initiative and will have several advantages, including:•••Appendix

It increases the clarity on the use of the criteria for new buildings.
Leverages the technological capabilities available for new buildings
Addresses the fact that not all building typologies are currently addressed in the Climate Bonds Criteria

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4.3 Whole Life Carbon Assessment
The current Climate Bonds building criteria focus on the in-use phase of a building’s lifecycle. However, the impacts of material
procurement and the construction of buildings represent an important source of emissions from the building sector.
Given that the knowledge and technologies exist to deliver net zero/ready buildings, the use of emissions proxies measuring only
operational phase environmental impacts for buildings in construction is increasing unfit for purpose for certifying new buildings.
Further, as operational emissions fall, the embodied emissions attributable to the delivery of new buildings and renovation ofexisting buildings becomes increasingly important. These emissions are not currently considered by the Climate Bonds buildings
criteria. See Section 5 for detailed information.
4.3.1.1

Embodied carbon emissions

The development of new buildings, and the renovation of existing building requires a carbon investment in materials, many of which
are carbon intensive. This embodied, or embedded, carbon has, until relatively recently received little attention in the built
environment. However, as buildings’ operational emissions shrink through energy efficiency and the use of renewables, theproportion of the whole life carbon that relates to these embodied emissions grows.
This increased focus on embodied carbon suggests that it is appropriate to include criteria related to embodied carbon into the
Climate Bonds building criteria. However, there are significant data challenges around establishing appropriate benchmarks forembodied carbon, viz: There is no globally agreed methodology for identifying embodied carbon benchmarks by country, city, orbuilding.
The emissions concerned are considered as scope three emissions for developers, and so sit under the relevant manufacturers’
scope one and two emissions. However, certification schemas should work to reduce demand for emission intensive materials to
encourage the manufacturers to reduce their impacts.
The embodied impacts of materials are specific to the place and time of manufacture, distance, and method of transportation to
the construction site. This specificity makes estimation at the early lifecycle stages a challenge.
The market for carbon-based information in construction materials, while growing, is still not mature. As a result, some materials
and components do not have any information and data quality is an issue in many locations.
Hence, reporting and accounting of embodied carbon (up-front emissions) has been made mandatory and This will be an interim
step and a new practice to disclose the nature of assumptions the market is marking. This will give an indication of the data quality
around the world which will keep us informed better for developing local Embodied Carbon pathways.

4.3.2 Why net-zero ready or net-zero compliance
The IEA defines a zero-carbon ready building is one which is highly energy efficient and either uses renewable energy directly oruses an energy supply that will be fully decarbonised by 2050, such as electricity or district heat 4. Additionally, there are somecomponents of buildings that should not be contemplated for a net zero ready buildings. No new buildings should be locking infossil fuel use for decades.
On-site energy consumption only relates to the parts of a building that an owner has operational control over, consistent with theexisting Commercial Buildings Criteria. Climate Bonds adopts the Greenhouse Gas Protocol’s definition of operational control: “…hasthe full authority to introduce and implement its operating policies at the operation”. Two example building types are provided
below for guidance:•

An office building owner will generally be responsible for “base building” energy consumption relating to heating,ventilation, and air conditioning; lifts and escalators; car park lights and ventilation; common area light and power; exterior
lighting and signage. Base building consumption excludes energy end uses controlled by the tenant including lighting within
tenant areas; tenant power; tenant supplementary cooling; tenant data facilities.

4Net Zero by 2050 - A Roadmap for the Global Energy Sector (windows.net)

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A hotel building owner will generally be responsible for “whole building” energy consumption, covering the entire scopeof energy end uses in a building.

•Portfolio application requirements
Such an issuer with multiple projects can aggregate them into one portfolio and it is the aggregated portfolio that mustsatisfy the required minimum improvement in emissions efficiency rather than each project included in the pool having tocomply.

•Post-issuance requirements
For new buildings, the issuer will need to provide technical consultant reports, design documents or similar documentation
to demonstrate that the building post-construction will deliver net zero carbon.

•

Ongoing reporting requirements
Issuers will need to demonstrate evidence on an annual basis that the building continues to be net zero carbon.
If the building misses the net zero carbon target by a small amount and this is attributed to unusual climate conditions forthat year, a climate-correction mechanism may be applied to adjust the target. Climate Bonds will then assess the building’s
performance against this adjusted target. The climate-correction mechanism will apply the methodology adopted by
Energy Star in the US or the Department for Business, Energy & Industrial Strategy in the UK. (This mechanism is alreadyincluded in the existing Buildings Criteria.)
Any renewable energy generated that is not used on-site must be exported to the grid or stored. Any renewable energy
certificates related to renewable energy generated on-site must be retired and must not be sold to other parties.

Note:

There are varying definitions of Zero Energy/ Carbon Buildings. The definition that aligns with
Climate Bonds’s is “Net Zero Energy Emissions”, where a building produces at least as much
emissions-free renewable energy as it uses from emissions-producing energy sources.

4.3.3 Role of hydrogen in Buildings
When the initial proposal to preclude fossil fuels from newly built buildings was agreed, there was some market resistance to the
proposal on the basis that the hydrogen economy was developing and might, in time, make for an appropriate replacement for
natural gas.
In response to these suggestions, we refer to the IPCC’s statement on hydrogen:“The ease of switching to electricity means that hydrogen is not expected to be a dominant pathway for buildings … Using
electricity directly for heating, cooling and other building energy demand is more efficient than using hydrogen as a fuel,for example, in boilers or fuel cells. In addition, electricity distribution is already well developed in many regions comparedto essentially non-existent hydrogen infrastructure, except for a few chemicals industry pipelines. ”.
The delivery of an entirely green hydrogen system is also limited by the availability of renewable technologies in a country and is
only considered feasible in the longer term. It therefore is considered unlikely that green hydrogen will be available in sufficientamounts to decarbonise heating within the necessary timescales. The current scale of expansion of renewables also means that
there will be competition for green hydrogen, and that - given the other technologies available to buildings - it may be better usedin contexts where it adds the most value, such as in industrial uses.
As the physical and chemical properties of hydrogen differ from those of natural gas, it is not possible to simply exchange natural
gas for hydrogen in the existing natural gas infrastructure. Further, metal pipes can degrade when they are exposed to hydrogenover long periods, and the resulting hydrogen leakage would be a significant risk to the delivery of the ambitions of the Par isAppendix

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Agreement. If the existing gas network were to be switched to just hydrogen, therefore, costly modifications to the gas pipeline
infrastructure would be necessary.
For existing building that already have a natural gas supply, the option to wait for the shift to a hydrogen economy rests with thebuilding owner. However, from a Climate Bonds certification perspective, the continued use of fossil fuels will preclude certificationof the building/bond.

4.3.4 Electrification of Buildings
Electrification of Buildings is an important step in decarbonising the buildings sector. The Intergovernmental Panel on Climate
Change (IPCC) states that to avoid the worst impacts of climate change, the world must dramatically reduce its carbon emissions
and prevent global warming from exceeding the 1.5-degree C. To achieve this, we must halve carbon emissions by 2030 and aim to
fully decarbonise by 2050. To achieve this in the buildings sector, research concludes that the lowest-cost pathway to eliminate
direct emissions from commercial and residential buildings is to electrify across different geographic locations.
Electrification of buildings can reduce the environmental impact of running a building significantly. Which in turn will reduce thereliance of traditional energy sources such as oil and gas, as electrified buildings rely on renewable energy.
Although the pathway towards electric buildings requires some initial upfront investment, the benefits are varied and with
Government funding available organisations will have support in achieving sustainability targets.

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5 Reporting and Accounting on Embodied Carbon and GHG
Scope 3 emissions
5.1 Whole Life Carbon Assessment and Embodied carbon
5.1.1 BackgroundThe built environment sector has a vital role to play in responding to climate change. Buildings currently being responsible for 40%
of global carbon emissions5, decarbonising the sector is one of the most cost-effective ways to mitigate the worst effects of climate
breakdown. Some of these emissions are from the operational emissions, those that we know and has been talked about leaving
behind, until recently the focus on embodied carbon. In the total 40% global carbon emissions, embodied carbon accounts for 13%
annually. This is expected to grow in the coming years with the increased construction initiatives. With the pressure to decarbonise
the built environment and deliver carbon neutral buildings in pursuit of global and national net zero goals, it is becoming increasingly
important for contractors and developers to tackle embodied carbon appropriately.
What is Embodied Carbon
According to the European Commission (2020), embodied carbon relates to “the greenhouse gas (GHG) emissions associated with
the non-operational phase of a project, namely the emissions released through extraction, manufacturing, transportation, assembly,
maintenance, replacement, deconstruction, disposal and end of life aspects of the materials and systems that make up a building(cradle to grave).”
Figure 8: Embodied Carbon lifecycle of a building

Source:How to address the challenges of embodied carbon in
2023? - Deepki

5.1.2 Scope of WLCA in New Buildings Criteria
As Climate Bonds already has established operational carbon pathways (that across the global covering specific countries/cities ina region, this is intended to look at the cradle to site instead of the WLCA approach. Meaning, Climate Bonds will look at:•••

Module A,
Module C (where the property/asset is demolished for a New Building) andModule D (where Module C is covered)

5 Embodied Carbon - World Green Building Council (worldgbc.org)

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Figure 9: Scope of WLCA under Climate Bonds Initiative low-carbon Buildings criteria
Scope for
Whole Life Carbon
Assessment (WLCA)

Reporting on
Mandatory reporting of WLCA for:••

New Buildings built on or after 2025 - For new build assets, buildings, or infrastructure
civil works all life cycle stages must be assessed, including module D, and all building
elements or infrastructure elements within the project site boundary must be included
in WLCA. This includes any facilitating works and site preparation inside and outside of
the asset footprint within the site boundary.
Demolition/deconstruction of existing asset for the purpose of New Buildings - When
any full/part demolition or deconstruction of an existing structure is required tofacilitate the construction of a new asset within the designated boundary, the emissions
associated with that demolition or deconstruction should be included in the WLCA in
sub module of module A5 which are classified into 4 parts (A5- (1-4)).

Scope of Modules•••

Module A: A0 - A5
Module C: C1 - C4
Module B: B6 - B8 (where applicable)

Key project stages toundertake WLCA•

Adopt as written in EN 15978 or RICS Guidance/international equivalence

Recommend steps to carryout WLCA•

Adopt as written in EN 15978 or RICS Guidance/international equivalence

Spatial Boundary•

A WLCA should consider all construction works relating to the project, including any
demolition or deconstruction, facilitating works and site preparation required forbuilding the asset, and external works within the site boundary. The site boundary
should be in line with the intended use of the built asset, including all areas associatedwith the project that are integral to its operations. A town planning red line can serveas the site boundary where appropriate.

Element category forbuilding assessments•

All buildings are made up of building elements, that are grouped into categories suchas foundations, superstructure, envelope, and services. Please refer to Table 1.

Material impacts•

Choosing Low-carbon Environmental product declaration (EPD) - this provides detailed
information about specific products that improve the accuracy of buildings LCA, andcomparative analysis can be carried out to be better informed.

Area measurement

Floor areas from the following sources must be used and clearly stated in the WLCA, in thefollowing order and/or subject to availability at different project phases:•••

Material quantity

BIM Model
Bill of Quantities (BoQ) or cost plan
Consultants drawing

A WLCA must cover all the items listed in a projects BoQ, cost plan, or as identified in otherrecords (3D models, drawings or specifications, etc) (Refer to Table 2).
Material quantities from the following sources must be used for each phase, and theirsource clearly stated.

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5.1.3 Reporting on Whole life carbon assessment in Climate Bonds Low-carbon Buildings criteria for New
Buildings
This mandatory reporting of WLC assessment should follow the RICS Guidance (Edition II), which has an international equivalence.

5.1.4 What is Whole Life carbon assessment?
A Whole Life Carbon Assessment (WLCA) is an estimation of the quantity of all carbon emissions expected to be emitted over theentire life cycle of a built asset. The assessment includes all life cycle stages of a project, which are explained using a modular
structure:•

Module A: Sourcing of raw materials - transport and fabrication of components (product stage) and the construction
process, including the demolition of any previous structure (construction stage).

•

Module B: Use stage - maintenance, repair and replacement, any planned refurbishment and the use of energy and waterover the life of the asset. It will include the emissions resulting from the use of asset, in addition to energy and water use(e.g., cars using a road).

•

Module C: End of life stage - anticipated emissions from demolition/disassembly, waste processing, associated transport,
and eventual disposal.

•

Module D: Potential benefits or costs from the recovery of materials leaving the asset during any stage, such as for reuse,recycling an or energy recovery, and the export of any energy generated by the asset. Module D is part of the WLCA process
but must be reported separately.

5.1.5 Scope of the WLCAThe scope of WLCA is adapted from the RICS Guidance (or international equivalence). This standard addresses all element andcomponent categories making up a built asset, during every stage: from extracting raw materials and manufacturing constituent
construction products, through operation, to recovery or disposal at end of life. This document standard can be applied to any typeof construction or civil project infrastructure, including building and/or infrastructure assets involving the following:1.

New construction/new build assets

2.

Demolition of existing and construction of new assets

WLCAs should be undertaken by an ‘assessor’ using the document directly or through software tools that functions in compliancewith its methodology (where applicable).

5.1.6 Process and structure of undertaking a WLCA
A full WLCA will identify figures for all the modules, covering life cycle stages A, B, C and D.
Module A: Covers emissions from all activities necessary to complete the construction of the asset.
•

Module A0 - non-physical pre-construction activities, is generally assumed to be Zero for buildings. However, forinfrastructure projects A0 can include ground investigations and activities associated with designing the asset.

•

Module A1 - A3 (Product Stage) - extraction, transporting and manufacturing processes necessary to produce theconstruction products, components and technical equipment required to construct the asset.

•

Module A4 - A5 (construction stage) - Transporting construction products and any construction processes necessary to
produce the construction products, components and technical equipment required to construct the asset.

Module B: Covers emission that occur over the use stage of the asset.
•

Module B1 - reports direct emissions and removals from construction products, such as emissions of blowing agents frominsulation, refrigerants from MEP or removal of CO2 through carbonation of concretes.

•

Module B2 - B4 - Material related emissions that occur from maintenance, repair, and replacement of the asset.

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Module B5 - Any refurbishment or change in performance of the asset (e.g., retrofit/refurbishment or extension) plannedat the outset of the project to occur at some point after construction is completed.

Module C1 - C4: Covers emissions during the end-of-life stage of an asset. This includes deconstruction or demolition, waste
processing, recovery or disposal and associated transport.
Module D: Covers the potential carbon loads (costs) and benefits beyond the system boundary from any recovery of material arisingfrom the construction (A4 - A5), use (B2 - B5) or end of life (C1 - C4 stages). This module covers the potential carbon benefits beyond
the system boundary of any utilities exported from the asset during use stages B6 - B8, such as generated electricity or treatedwater.
Figure 10. Building life cycle stages and information modules

The key terms relating to carbon emission relate to these modules as follows:
•
•
•
•
•

Upfront carbon – modules A0 – A5, covering all impacts up to the completion of the project but excluding any sequesteredbiogenic carbon stored within any construction products incorporated into the asset.
Embodied carbon – Modules A0 – A5, B1 – B5 and C1 – C4, all material related emissions.
Operational carbon – Modules B6 – B7, energy and water use
User carbon – Module B8, user activities
Whole-life carbon – Modules A, B and C. This is the system boundary for a full carbon assessment over the assets life cycle.

5.1.7 Undertaking WLCA key project phases
As a minimum, a complaint WLCA should be undertaken at the following key project phases:•••
Appendix

Concept design phase
Technical design phase
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Post-completion phase (Post completion assessment).
o For early stage design phase, pre-construction forecasts should be used as the project baseline for ongoing carbon
reporting and progress tracking throughout the project.
o For technical design and construction phases, the pre-construction forecasts should be used to evaluate theevolving design, and the at-tender forecasts should be used to evaluate tenders.
o For the post-completion stage, it should be used to check the carbon reductions predicted in the pre-construction
and at-tender forecasts have been achieved.

Mandatory requirements for complaint WLCAs during project development through to post-completion can be found in Appendix C.

5.1.8 Recommended steps to complete a WLCA6
Adapted from Whole Life Carbon Assessment for the Built Environment (RICS II)

Figure 11. Recommended steps to complete a WLCA

5.1.9 Supporting framework for conducting WLCA•

Spatial boundary:
A WLCA should consider all construction works relating to the project, including any demolition or deconstruction,
facilitating works and site preparation required for building the asset, and external works within the site boundary. The
site boundary should be in line with the intended use of the built asset, including all areas associated with the project thatare integral to its operations. A town planning red line can serve as the site boundary where appropriate.

•

Element categories for building assessments:
All buildings are made up of building elements, that are grouped into categories such as foundations, superstructure,envelope, and services. Appendix II outlines the building elements that should be covered in the WLCA to ensure
consistency of measurement and reporting.

All building elements set out in Appendix II (Appendix C Scope related to building elements, derived from NRM on the RICS
guidance).

6

Whole Life Carbon Assessment for the Built Environment, RICS Professional Standard, 2nd edition - RICS iConsult

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5.1.10 Types of projects included in the Climate Bonds Buildings Criteria
Different project types have different characteristics that may require changes in emphasis when conducting a WLCA. The following
identified particularities that relate to the main project type adopted from RICS covering only New Building as per the Climate Bonds
refresh criteria.
•

New Buildings/new-build assets
For new build assets, buildings, or infrastructure civil works all life cycle stages must be assessed, including module D, andall building elements or infrastructure elements within the project site boundary must be included in WLCA. This includes
any facilitating works and site preparation inside and outside of the asset footprint within the site boundary.

Figure 12: Life cycle stages of an asset

•

•

•

Appendix

Demolition, deconstruction, and new construction
When any full/part demolition or deconstruction of an existing structure is required to facilitate the construction of a new
asset within the designated boundary, the emissions associated with that demolition or deconstruction should be includedin the WLCA in sub module of module A5.
Module A5 – Construction and installation process
The carbon emissions arising from any on-site construction-related activities must be considered in module A5. This
includes any investigation works; demolition works associated with refurbishment or redevelopment of existing built assets
or sites; temporary works associated with installation processes; energy consumption for site accommodation and plantuse; and the impacts associated with any waste generated through the construction process, its treatment and disposal.
Module A5 should be split and reported as four separate sub-modules:

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Figure 13: Sub-modules of module A5

5.2 Area measurement
Floor areas from the following sources must be used and clearly stated in the WLCA, in the following order and/ or subject toavailability at different project phases:▪

BIM Model▪

Bill of Quantities (BOQ) or cost plan▪

Consultants drawing

Floor area measurement should be gross internal area (GIA) and should be reported in normalised metrics. The exact approach tomeasuring GIA should also be provided in a report format. For external works the area must be the works within the projectboundary.
The WLCA report must be reported using kgCO 2e or any stated clear metric multiple.

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5.3 Material Quantity
A WLCA must cover all the items listed in a projects BOQ, cost plan, or as identified in other records (3D models, drawings o r
specifications, etc).
Material quantities from the following sources must be used for each phase, and their source clearly stated:
Table 1: Source of material quantities to be used at each phase for WLCA
Project phase•

BoQs/ cost plan•

Estimation from drawings•

Cross-reference from BIM/ 3D model, where available

Technical design andconstruction phases•

BoQs/ cost plan•

BIM model data

Post-completion phase•

As-built BIM model•

Cross-reference with as-built records,•

including material delivery records, concrete•

pours, etc. where available

Early design phase

Appendix

Material quantity source

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6 Guide to Scope 3 Accounting and Reporting
6.1 Background6.1.1 What is GHG accounting?
Greenhouse Gas (GHG) accounting is a process of quantifying and reporting GHG emissions and removals associated with humanactivities. GHG accounting is important because it helps individuals, organisations and governments understand and track theircarbon footprint and identifies area where emissions can be reduced. They are also important for ensuring compliance withregulatory requirements and meeting sustainability goals.
The application of GHG accounting is numerous and diverse. It can be used by companies to measure and manage their carbon
emissions, identify energy saving opportunities and improve their environmental performance.
It is an essential tool for addressing climate change and achieving a sustainable future. By accurately measuring and reporting GHG
emissions, individuals, organizations, and government can work together to reduce emissions and transition to a low carbon
economy.

6.1.2 GHG Accounting in the real estate sector
One of the key applications of GHG accounting in the real estate sector is to inform sustainability strategies and set targets for
reducing emissions. This includes assessing the energy efficiency of buildings, reducing energy consumption, and promoting the useof renewable energy sources. It can also help real estate companies to identify areas where emissions can be reduced throughchanges in transportation, waste management (human behaviour) and supply chain practices.
It is increasingly being used to access the environmental performances of real estate investments and to inform investment
decisions. This includes evaluating the carbon footprint of buildings and portfolios as well as assessing the potential for carbon
pricing and regulatory risks. It is crucial for the real estate sector to manage its environmental impact and meet the sustainability
goals, as well as respond to changing the market demands and regulatory requirements.

6.1.3 Corporate GHG protocol standard
Until recently, companies have focused on emission from their own operations predominantly known as Scope 1 and Scope 2. With
the growth in the market, there is an increasing understanding in the importance of accounting of GHG emissions along their value
chains and products (known as Scope 3) to manage the GHG-related risks and opportunities.
The GHG Protocol Corporate Value chain (scope 3) Accounting and reporting standard 7 is an internationally recognised method forcompanies to account for their Scope 3 emissions.
The Corporate Standard classifies a company’s direct and indirect emissions into three ‘scopes’ and requires that companies accountfor and report on scope 1 emissions (i.e., direct emissions from owned or controlled sources), and all scope 2 (i.e., all indirectemissions from the generation of purchased energy consumed by the reporting company and there is a flexibility in accounting for
Scope 3 emissions (i.e., all other indirect emissions that occur in a company’s value chain. An overview of the three GHG protocol
scopes and categories of scope 3 emissions is provided below.

7 Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf (ghgprotocol.org)

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Figure 14. Overview of GHG protocol scopes and emissions across the value chain

Source:Scope3_Calculation_Guidance_0.pdf(ghgprotocol.org)

This guidance aims to assist companies under the Climate Bonds Low-carbon Buildings Sector to report on Scope 3 emissions andis intended to meet the suggested sector-specific guidance requirements, as set out in the GHG Protocol Corporate Value Chain(Scope 3) accounting and Reporting Standard to promote additional consistency in way of companies accounting and reporting on
scope 3 emissions.
This should be used in conjunction with the more detailed Technical Guidance for Calculating Scope 3 emissions document 8 while
undertaking the calculations along with the GHG protocol.

8 Scope3_Calculation_Guidance_0.pdf (ghgprotocol.org)

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6.1.4 Overview of Scope 3 categories
The GHG Protocol Corporate Value chain Standard categorizes scope 3 emissions into 15 categories, as listed in figure 10 above andfigure 11 along with the description of each of the 15 categories is presented in table 3. The categories are intended to provide
companies with a systematic framework to organize, understand and report on the diversity of scope 3 activities within a corporate
value chain.
Table 2. Scope 3 Categories (adapted from GHG Protocol)
Upstream or downstream
Upstream scope 3
emissionsDownstream scope 3
emissions

Scope 3 category
1
2
3
4
5
6
7

Purchased goods and services
Capital goods
Fuel- and energy-related activities (not includedin Scope 1 and scope 2)
Waste generated in operations
Business travel
Employee commuting
Upstream leased assets

8
9
10
11
12
13
14

Downstream transportation and distribution
Processing of sold products
Use of sold products
End-of-life treatment of sold products
Downstream leased assets
Franchises
investments
Source:Corporate-Value-Chain-Accounting-ReporingStandard_041613_2.pdf (ghgprotocol.org)

Table 3: Description and minimum boundaries
Category description

Category
1

Purchased goods
and services•

2

Capital Goods

Extraction, production, andtransportation of capital goods
purchased or acquired by the reporting
company in the reporting year.

Fuel and energy
related activities(not included in scope 1
and 2 emissions)

None

n/a

4

Upstreamtransportation anddistribution

None

n/a

5

Waste generated inoperations

None

n/a

6

Business travel

None

n/a

7

Employeecommuting

None

n/a

3

Appendix

Minimum boundary

Extraction, production, andtransportation of goods andservices purchased or acquired by
the reporting company in thereporting year, not otherwise
included in categories 2 - 8•

All upstream (cradle-to-gate) emissions ofpurchased goods and services

All upstream (cradle-to-gate) emissions ofpurchased capital goods

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Category

Category description

Minimum boundary

8

Upstream leased
assets

None

n/a

9

Downstream
transportation anddistribution

None

n/a

10

Processing of soldproducts

Processing of intermediate products
sold in the reporting year bydownstream companies (e.g.,
manufacturers)

The scope 1 and scope 2 emissions of downstream
companies that occur during processing (e.g., fromenergy use)11

Use of soldproducts

End use of goods and services sold by
the reporting company in the reportingyear

The direct use-phase emissions of sold products
over their expected lifetime (i.e., the scope 1 andscope 2 emissions of end users that occur fromthe use of: products that directly consume energy(fuels or electricity) during use; fuels andfeedstocks; and GHGs and products that containor form GHGs that are emitted during use)•

Optional: The indirect use-phase emissions ofsold products over their expected lifetime(i.e., emissions from the use of products thatindirectly consume energy (fuels or electricity)during use)

12

End-of-life
treatment of soldproducts

Waste disposal and treatment of
products sold by the reporting company(in the reporting year) at the end of
their life

The scope 1 and scope 2 emissions of waste
management companies that occur during
disposal or treatment of sold products

13

Downstream leased
assetsOperation of assets owned by thereporting company (lessor) and leased
to other entities in the reporting year,
not included in scope 1 and scope 2 reported by lessor

The scope 1 and scope 2 emissions of lessees that
occur during operation of leased assets (e.g., fromenergy use).

n/a

14

Franchises

None

15

Investments

Operation of investments (including
equity and debt investments and project
finance) in the reporting year, notincluded in scope 1 or scope 2•

Optional: The life cycle emissions associatedwith manufacturing or constructing leased
assets

Source:Corporate-Value-Chain-Accounting-ReporingStandard_041613_2.pdf (ghgprotocol.org)

6.2 Defining the categories of the building and construction system
Defining the categories of the building is a key part for reporting and accounting of Scope 3 emissions. This determines who are thekey players included in a company’s organizational boundary and how emission from each operation is integrated by the reporting
company and has been adopted from world business council for sustainable development. Figure 3 explains the categories of thebuilding and construction system while figure 4 shows the value chain inside the building and construction system.

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Figure 15. Categories of the building and construction system

Source:The Building System Carbon Framework(wbcsd.org)

Source:The Building System Carbon Framework(wbcsd.org)

Figure 16. Value chain of building and construction system

6.3 Guidance for reporting and accounting under the Climate Bonds Low carbon
Buildings Criteria
6.3.1 Building value chain and their intended users
The below table provides the list of building value chain identified from WBCSD and their intended users who are required to reportfor Scope 3 emissions under the Climate Bonds Low carbon buildings criteria.
Appendix

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Table 4: Alignment of intended users within the Building value chain
Building value chain

Intended users

Manufacturers

Users who are linked with the manufactures (as their products are an essential
part of a buildings value chain representing a large portion of embodied carbon).

Construction••

Architecture/engineering firms
Property Developers

Owners/Managers

•
•
•
•
•
•

Developers
Property/Asset managers
Owner - lessor
Owner - occupier
Financial Institutions (FI) (?)(Real estate?)

Deconstruction•••

Construction firms
Developers
Individual house owners (?)

6.3.2 Intended users and their relevant target categories
The below table provides the list of intended users and their relevant target categories adapted from GHG Protocol Corporate Value
chain accounting and reporting standard and Table 4 provides the relation between Life cycle stages (for Whole Life Carbon
Assessment) and the corresponding reporting category under the GHG Protocol.
Table 5: Scope categories and target categories
Intended users

Cat 1

Cat 2

Cat 3 toCat 9

Architecture/engineering
firms

Appendix✓

Cat 10Cat 11

Cat 12✓✓✓

Cat 13

Property Developers✓

Property/Asset managers✓

Owner - lessor

✓

✓

✓

Owner - Occupier

✓

✓

✓

Cat 14

Cat 15✓n/a

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Table 6: Relation between Life Cycle Stages and GHG Protocol Categories
Life Cycle Stages
A1 - A5 Includes the Embodied Emissions of a built
environment project

Reporting Category••

Appendix

Reported as Scope 3 under Category 1, 2 and/or 4, asapplicable.
In the year the project occurred.

B1, B2, B3, B6 - Operational emissions associatedwith a built environment projectB4 and B5 are embodied emissions reported as
Scope 3 in the year of replacement or
refurbishment•

Category 1, cat 10, cat 13(in-use embodied emissions for renovation or maintenance)

C1 - C4 Embodied emissions of a build
environment project (Reported as Scope 3)•

Category 5 or 12 in the year the materials reach end of life

D emissions are not embodied emissions but canbe considered relevant carbon sinks if additional
accounting criteria is met.

•n/a

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Appendix A: TWG and IWG members
Technical Lead Advisor:
Ché Wall

Director, Flux Consultants

TWG Members
Alan Yates

Technical Director - Sustainability,
BRE Group

Panama Bartholomy

Director, Investor Confidence Project(Environmental Defence Fund)Alex Rathmell

Director, EEVS Insight

Paolo Zancanella

Officer, European Commission (Joint
Research Centre)

Annie Degen

Special Adviser Long Term Finance,
UNEP Finance Initiative

Peter Sweatman

Chief Executive, Climate Strategy &Partners

Ché Wall

Director, Flux Consultants

Prashant Kapoor

Principal Industry Specialist,
International Finance Corporation

Chris Botten

Programme Manager, Better
Buildings Partnership

Robert Cohen

Technical Director, VercoJohannes Kreissig

Vice President Building &Construction, thinkstep

Simon Brooker

Executive Director, Clean Energy
Finance Corporation (CEFC)John Dulac

Buildings Sector Lead - Energy
Technology and Policy, International
Energy Agency (IEA)

Tatiana Bosteels

Head of Responsible Property
Investment, Hermes Real Estate

Jorge Chapa

Head of Market Transformation,
Green Building Council of Australia(GBCA)

Teun van den Dries

Founder & CEO, GeoPhyLoÏs Moulas

CEO, Observatoire de l'Immobilier
DurableVictor Rojas

Project Lead, Investor Confidence
Project (Environmental Defense Fund)

Oliver Rapf

Executive Director, Buildings
Performance Institute Europe

IWG Members
Grace Tam

Director - Debt markets
Clean Energy Finance Corporation(CEFC)

Hugh Garnett

IIGCC, UK

Isabelle Schatz

Blkb Switzerland

Szymon Smolarek

ING Hipotec, poland

David Sellars

First Mac, Australia

Alison Chan

Metrics

Laura Conigliaro

Jupiter AM, UK

Begum Gursoy

Sustainalytics , EU

Pip Best

EY, NZ

Karl Downey

SBTi, UK

Frans Baas

Vestada, NL

Jennifer Cooper

Brookfield, aus

Appendix

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