Development of Carbon Bonds

Climate “bonding” describes the use of fixed-income financial instruments that are linked in to climate change solutions. Climate bonds are a relatively new monetization of greenhouse gas reduction services, but their availability and use is growing rapidly. Institutions and Investors with and without a green mandate are showing interest in the climate bonding market.

Source: Climate Bond Initiative

From 2015 to 2016, the Climate Bonds Initiative reports that there was a 92% increase in green bonds issuance to $92 billion, with different types of issuers starting to issue green bonds that act to insure implementation of climate adaptation and mitigation projects. Major categories of climate bonding currently include waste management, transportation, and building, as well as energy, agriculture, forestry, and adaptation.

Green bonds are becoming an increasingly prevalent form of green finance, particularly for clean and sustainable infrastructure development and their large funding needs. They offer a vehicle to both access finance from the capital markets and deliver green impacts that can be verified against standards. As the World Bank notes:

  • Green bonds offer investors a way to simultaneously make money and help the planet;
  • The World Bank helped pioneer the green bond market, which now exceeds $30 billion a year; and
  • Global action on climate change needs private sector financing such as green bonds.

Explaining that “appropriate investment in Land Use sectors is critical for promoting adaptation to climate change and facilitating increased climate resilience in the social, economic, and environmental systems that underlie production of food, feed, fuel, and fibre” the Climate Bonds Initiative has launched a new Technical Working Group (TWG) to develop Phase II of the Land Use Criteria of the Climate Bonds Standards. The Criteria aims to increase climate-friendly investment in agriculture, forestry and other land uses.

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