The Climate Bonds Initiative (CBI) and the World Business Council for Sustainable Development (WBCSD) today formed a new partnership designed to drive the development of low-carbon finance that can help address sustainability and climate challenges.
The organisations have signed a Memorandum of Understanding (MoU) agreeing to work together on the development of the corporate green bond market. Green bonds are used to fund projects with a positive environmental or climate benefit, however the corporate green bond market is still relatively small. In 2015, corporates issued USD 13.6 billion compared to overall green bond issuance during the year of approximately USD 41.8 billion.
The participation of the finance sector is a critical element of accelerating the transition to a low-carbon economy. New financial instruments are needed in order to mobilise the capital that will implement low-carbon and climate-resilient solutions at scale, and within the timeframe set by the Paris Agreement.
Since 2007 the overall green bond market has demonstrated a compound annual growth rate of 50 per cent, proving that it is an efficient capital intermediary between green/climate projects and investors.
WBCSD and CBI believe that the corporate market will gain further scale once the benefits of green bonds are better understood and the lower financing costs outweigh verification and reporting efforts.
In addition, developing robust, liquid and transparent green bond markets will help to drive down the cost of capital for low-carbon projects across both established and emerging economies.
Peter Bakker, President and CEO of WBCSD, says: “Green finance is a critical part of the transition to a low-carbon economy, and we have an exciting opportunity to support the development of that market through this partnership. With CBI we aim to uncover new avenues for collaborating with the finance sector on sustainable development.”
“The post-Paris world shows that the momentum for a low-carbon economy is undeniable, and coupled with worldwide initiatives such as the Low Carbon Technology Partnerships Initiative (LCTPi) that will require low-carbon investment, this agreement has the potential to be transformational.”
Sean Kidney (pictured), CEO Climate Bonds Initiative, says: “We are the largest independent green bond organisation, and partnering with a sustainability leader like the WBCSD is exactly the right way to move the post-COP21 business environment forward. This partnership presents a significant opportunity to drive the development of corporate green bonds to help address worldwide sustainability and climate challenges.”
“The MoU provides a substantive foundation for cooperative projects to mobilise the finance sector in the development of green finance solutions that support the low-carbon business and economic transition.”