Blog

December 31, 2015

 

We’re still reeling from the excitement of 2015’s Conference of Parties (COP21) held in Paris earlier this month. While there are plenty of articles summarizing the main events and takeaways from the largest climate summit in the world, I wanted to share my experience as well as some industry trends First Environment has been tracking and actively supporting. In particular, we have seen a surge of participation in climate change discussions by the financial industry compared to previous years. Banks and other institutions attended COP21 in full force and with a focus on funding for ‘green’ (or climate-friendly) projects. These organizations recognize that we will never be able to achieve the 2°C goal without significant investments in renewable energy. In order to finance such projects, options such as certified Green Bonds or Climate Bonds as well as funding through vehicles like the Green Climate Fund (GCF) and Adaptation Fund are becoming more and more in demand.

 

Developed countries reaffirmed at COP21 a goal set out at Copenhagen in 2009 to provide $100 billion in funding to developing countries by 2020 to help them adapt to and mitigate the effects of a warming climate; this includes developing low carbon alternatives. Much of this funding may come through direct access funds, such as the GCF and Adaptation Fund, under which “national or subnational entities become accredited to receive finance directly from the fund without going through an international intermediary (like the World Bank or a regional development bank).” (Source: World Resources Institute, “Direct Access” to Climate Finance: Lessons Learned by National Institutions). This gives developing countries access to the financing needed to meet their country commitments for emission reductions, and also provides a streamlined process that can encourage projects be carried out according to established international standards (like those for third party verification), resulting in accurate and efficient offsets.

 

The strong showing by financial institutions at COP21 this month proves an acknowledgement of this growing need and willingness to fund green projects worldwide. With the emergence of the Green Bond Principles and Climate Bonds Standard this year, the private sector is beginning to realize the opportunities that exist in this area and have begun implementing its own mechanisms to expand on funds. The green bond market is growing quickly with activity in 2015 anticipated to surpass 2014 (which was a record year itself, with over $36 billion of labeled green bonds). For the first time, investors have specific project eligibility and technical specifications that defined what it means to be a certified Climate Bond. Our own Phil Ludvigsen assisted in the development of the Climate Bonds Standard 2.0 since the formation of the initial working group.

 

We’ve already adapted our service offerings to address this industry need. As the only approved U.S.-based verifier under the Climate Bonds Standard, First Environment will remain tuned into the global discussion of climate finance and continue to support financial institutions to promote green bond certification as a way to better confirm a project’s environmental impact.

 

For more information on green bonds, see our recent thought leadership articles featured in Environmental Finance:

 

Advanced Topics in Green Bonds: Risks

Advanced Topics in Green Bonds: Rewards