GLOBAL - The Climate Bonds Initiative has released the final approved text of the prototype Climate Bond Standard.
The standard aims to be a screening tool for investors and governments to support investment in delivering a low-carbon economy.
Bonds complying with the standard will be certified as 'climate bonds' - a mark that assures their contribution to the delivery of a low-carbon economy.
In its first iteration, the released version lists wind energy investments currently eligible with an expansion to solar energy and other renewable energy investments to follow in the coming months.
The finalised text was approved by the Climate Bond Standards Board, a group of institutional investors and leading environmental NGOs consisting of the California State Teachers' Retirement System (CalSTRS), the Natural Resources Defense Council, the California State Treasurers' Office, the Investor Group on Climate Change (IGCC), the Carbon Disclosure Project (CDP) and the Certes Investor Network on Climate Risk (INCR).
The release concludes a six-month development phase including a public consultation period and input from industry experts such as the International Finance Corporation (IFC), Standard & Poor's, Aviva Investors and KPMG.
In addition to types of investments that are eligible, the standard will address traceability of funds and types of bonds than can be certified. Eligibility criteria for different types of investment will be released progressively over the coming year.
Norwegian state secretary Hilde Singsaas, responsible for the Norwegian sovereign wealth fund, said: "The Climate Bond Initiative is an important project that could help spur the development of green bond markets suitable for institutional investors.
"Efforts to develop scientifically credible, evidence-based standards for what types of projects and technologies are eligible for green bond certification will be an important factor supporting the integrity of these markets.
"We will closely follow the development of this and other similar projects aiming to address climate change financing and assess possible investment opportunities that fit with the investment strategy for the Government Pension Fund Global."
Some $12bn (€8.9bn) of bonds backed by investments related to climate change solutions have already been issued internationally, according to the Climate Bonds Initiative Issuance List.
In other news, tropical forest think tank the Global Canopy Programme (GCP) has released 'Understanding forest bonds', a practical guide to using forest bonds to raise large-scale, up-front finance for tropical forests.
Forest conservation is vital in the fight against climate change and is now at the heart of the UN climate change negotiation process. But GCP is concerned that international mechanisms designed to save forests are developing far too slowly.
Following a joint workshop earlier this year, WWF, GCP and the Climate Bonds Initiative (CBI) called on participating governments to focus on bonds as an innovative mechanism to use the limited public funds available to leverage much larger amounts of private-sector finance for tropical forests.
Bonds already play this role effectively in diverse sectors, including energy and water. But despite increasing interest in their potential, a key workshop conclusion was that the international forest community still lacks the practical understanding of forest bonds required to make them a reality.
Matthew Cranford, research associate at GCP and the guide's lead author, said: "'Understanding Forest Bonds' aims to speed progress by bridging the communication gap between policymakers and the investment community. It explains how different types of bond could help raise the tens of billions of dollars required to slow forest loss across different tropical regions, and why the private sector would invest.
"Existing mechanisms, such as ecosystem service markets and green fiscal reform, are key to protecting forests in the long term - but they will take time to implement at scale.
"Either by issuing forest bonds or creating the right regulatory environment to support their issue, governments could begin tapping into global capital markets immediately to deliver finance to forests at the scale and with the urgency required."
The GCP will be convening a dialogue on forest bonds on 4 December as part of Forest Day, an event at the UN Climate Conference in Durban.
Lastly, the UK sustainable investment and finance association UKSIF has called on companies to disclose pay ratios in their annual reports.
The trade body said this is a material statistic for investors as it can indicate quality of people management and affect the reputation of companies and industries.
In its response to the government's consultation on 'The Future of Narrative Reporting', UKSIF also highlighted the need for companies to explain more clearly which environmental, social and governance (ESG) factors are shaping their business strategies and how these may affect their future business success.
UKSIF chief executive Penny Shepherd said: "The pay multiplier for senior executives compared with the average employee can affect productivity as well as reputation. This can therefore be a valuable metric for investors assessing company performance within industry sectors.
"More generally, we hope this consultation will lead to greater focus on business strategies and key metrics within company reporting and reduce the use of boilerplate text."