ThinktoSustain.com: What future do you envisage for Climate Bonds?
Sean Kidney: We expect climate bonds to become a key preferencing tool for governments in coming years, with up to $ 300 billion a year of certified bonds projected for the latter part of this decade.
We also expect that eligibility criteria for climate bonds will become de facto criteria for a range of investment areas.
ThinktoSustain.com: Which institutional investors would most likely invest heavily in Climate Bonds?
Sean Kidney: We have interest from a large swathe of the world’s largest pension funds, as well as from State Treasuries like California’s.
CalSTRS (the second largest in the U.S.), for example, last year gave an instruction to all it’s fund managers to look for climate change related risks and opportunities across all asset classes. Certification of Climate Bonds provides them with an easy-to-use preferencing tool.
ThinktoSustain.com: What investment options can a retail investor look at through climate bonds? How much similar or different is it from the existing government bonds?
Sean Kidney: Climate bonds can be government, corporate, covered, asset-backed, or junk for that matter. What distinguishes them is the integrity of their claim to be an investment that helps address climate change.
An investor will still need to do financial due diligence. Climate Bonds will provide a universe of debt at all rating levels from which to constrict a portfolio suitable for the risk strategy of an investor who is also concerned that their fixed income investments are in areas that address an over-riding environmental threat to the economic and social security of the planet.
About Sean Kidney
Sean Kidney is Chair and co-founder of the London-based Climate Bonds Initiative, an investor-focused not-for-profit promoting long-term debt models to fund a rapid, global transition to a low-carbon economy. He is a member of the UK Government’s Capital Markets Climate Initiative; a steering committee member of the Transform UK – a business/NGO coalition, pushing for a rapid shift to a low-carbon economy; and chair of the UK Local Energy Efficiency Coalition (LEEP), developing “scalable and sustainable financial solutions” suitable for climate bond financing at an institutional investor scale.
Sean is also a Director of the Network for Sustainable Financial Markets, an international, non-partisan network of finance sector professionals, academics and others who see the need for fundamental changes to improve financial market integrity, stability and efficiency.
About the Climate Bonds Initiative
The Climate Bonds Initiative is an investor-focused not-for-profit, promoting large-scale investment in low-carbon industries. The Initiative undertakes projects to promote policy architecture that will support renewable energy and energy efficiency investibility, and to educate investors and prospective issuers about the opportunities with climate-themed bonds.
The Initiative is currently developing an International Standards and Certification Scheme for climate bonds. Apart from climate bonds standards, The Climate Bonds Initiative is developing:
- Proposals for government architecture – regulatory mechanisms, tax policies, green banks – that will support a rapid scaling up of investment.
- Models for engineering investibility in projects and assets necessary for a rapid transition to a low-carbon economy.
- Projects to demonstrate how to engineer investibility.
The Climate Bonds Initiative is a project of:
- The Network for Sustainable Financial Markets – finance sector professionals and academics in multiple countries dedicated to improving financial market integrity and efficiency; and
- The Carbon Disclosure Project – an independent not-for-profit that collects and distributes high quality corporate climate change information for integration into business and policy decision making.
