The Climate Bonds Initiative and consortium partners, Alliance for Global Water Adaptation (AGWA), Ceres, World Resources Institute and CDP, have released for public comment the world’s first standard for low carbon and climate resilient water bonds.
The proposed Water Climate Bond Standard aims to bring a focus to vulnerability assessment and climate mitigation, and adaptation planning to the fixed income space. It will allow investors to prioritise projects that are seriously considering their climate impacts and climate resilience.
“The key attribute of the standard is to start getting bond issuers to think about the impact climate has and will have on water resources,” Justine Leigh-Bell, Climate Bonds Standard Programme, from the Climate Bonds Initiative, told The Source. “Not all clean water projects are green. It is important to identify these risks and develop a plan to manage these risks. It is about transparency and disclosure in these early days of the market.”
The key attribute of the standard is to start getting bond issuers
to think about the impact climate has and will have on water resources
A Technical Working Group (TWG) and an Industry Working Group (IWG), overseen by the consortium partners, have developed the standard.
The TWG comprises internationally recognised academics and experts, and the IWG has representation from investors, public utilities, water NGOs and international policy bodies.
The proposed standard will certify water investments that have:
• carried out climate vulnerability assessments considering past, present and future climate risks and environmental losses; and
• created resulting adaptation and/or mitigation plans.
“Water bonds will most likely come out of the developed world initially due to the nature of the market,” added Leigh-Bell when asked which areas would be the main focus for the bonds. “It currently seeks investment-grade product which is difficult for the developing countries to offer, but development finance institutions may issue bonds with water assets that are destined for the developing countries. Eventually, as the market grows, we will see both regions of the world participating.”
The Water Climate Bond Standard is now undergoing a period of international public consultation, seeking investor, industry and stakeholder comment. In February a revised draft will be then submitted to the Climate Bonds Standard Board for consideration and once approved will be ready for market release.