Workshop on “Innovative solutions for climate finance”
CIRED and IASS Potsdam,
CIRED, Paris, 8-9 July 2014
Green Bonds for
low-carbon energy transition
and global climate funding?
Asbjørn Torvanger
CICERO
What is a Green Bond?
•
A bond is an instrument of indebtedness of the bond
issuer to the holders. It is a debt security, under which the
issuer owes the holders a debt and, depending on the
terms of the bond, is obliged to pay them interest and/or to
repay the principal at a later date (from Wikipedia)
•
Bonds are suited for climate change projects:
•
•
Provide up-front capital for infrastructure projects
Guaranteed returns are attractive to large institutional investors
•
A Green Bond (GB): Supports sustainable development,
low-carbon growth and climate change resilience
•
GB motivation for investors: social responsibility; image
building; prepare for future markets
Technologies/project types; review
 Reduced emissions of carbon dioxide; improved energy
efficiency; higher share of renewable energy sources
 Waste treatment and recycling; Transportation infrastructure;
Sustainable (energy-efficient) buildings; Water management;
Climate risks and adaptation
 Red flag – avoid: Long-term ‘lock-in’ effects; fossil fuel based
energy production
 A second opinion: An independent environmental quality
review of a green bond issuer’s framework for selecting
projects and investments to be eligible for green bond
funding. (CICERO has a major share of this market)
Actors
Green bonds on target to double in 2014
Big green potential
Green share
0,04%
Global bond market = approx. $80 trillion
$100 billion = 0,13%
of total bond market
Global climate agreement
EU
Green Climate
Fund
Public
climate
finance
Derisking
Low carbon
energy
transition
Private
climate
finance
* Impact
* Greenness
Green Bonds
Green Bonds: Greenness and impacts
• GB as bottom-up based nudging. Exist and is fast growing!
• But do GB make a difference? Is the BaU GHG emission path
bent downwards?
• What are impacts of GB on sustainability – e.g. in terms of
low-carbon energy transition? (Deep green, medium green,
light green?)
• How do investors react to green labeling in the bond market?
• Will reduced investments in brown activities increase
profitability and attract other investors, thus evaporating effect
on GHG emissions?
Green Bonds: Contribute to global
climate finance?
o Linking public and private funding: Big gap in required global
funding – combine with - Large private GB funding
o Can GB facilitate private climate financing, e.g. of the Green
Climate Fund?
o How can governments incentivize private sector finance
towards climate finance (especially in DCs)?
o Is government de-risking efficient and feasible? What riskmitigation instruments to use?
o How can the Green Climate Fund mobilize private sector
finance, e.g. through GB?
Extra slides
Green bonds on target to
double in 2014
Green Bond New Issuances
20
WB goal = 20 Bill. USD
18
16
Billion USD
14
12
10
Q1
8
6
4
2
0
2007
2008
2009
2010
2011
2012
2013
2014