Resilient Green Finance: SWP in Green and Climate Bond Criteria
São Paulo, Brazil
Description: Much of the world’s infrastructure is funded through a type of loan called bonds, especially for large public infrastructure projects. The investor community has become increasingly concerned about the climate risks that investments are exposed to, potentially reducing the ability of those investments to perform as designed. In addition, many investments are now being developed explicitly to reduce the exposure of communities to negative climate impacts. How can investors evaluate these claims for resilient infrastructure or infrastructure for resilience?
Beginning in 2007, bonds that are labelled “green bonds” or “climate bonds” were developed to alert potential investors that the investment had a positive environmental and/or climate adaptation or climate mitigation role. As the green and climate bonds market has grown from a few billion US$ annually to about US$200 billion in 2018, concerns over the credibility of these investments have grown.
Action & Impacts: Beginning in 2014, a consortium of NGOs including the CBI (Climate Bonds Initiative), AGWA (the Alliance for Global Water Adaptation), WRI (World Resources Institute), Ceres, and CDP worked to develop a set of water resilience criteria. Created with the consultation of some 150 experts and investors from five continents and many areas of expertise, the criteria score the water resilience of both gray and nature-based solutions (CBI, 2018). These criteria particularly emphasize many of the core aspects of SWP, including the use of basin scale management, modeling ecological and hydrological qualities through the lens of robustness and flexibility and the integration of adaptive governance and allocation systems (Gartner and Matthews, 2018; Matthews, 2018). Emerging markets such as China have seen explosive growth in the green and climate bonds market (Dai and Matthews, 2018).
The first iteration of the criteria, published in 2016, focused on the ecological and social resilience of gray water infrastructure; San Francisco Public Utility Commission issued the first bond using the criteria that year, while the nature-based solutions criteria were launched in 2018. To date, about US$8 billion in bonds have been issued against the criteria, spanning bonds from North America, Africa, Australia, Europe, and Asia.
References
CBI (Climate Bond Initiative), AGWA (Alliance for Global Water Adaptation), CDP (Carbon Disclosure Project), Ceres and WRI (World Resources Institute). 2018. “Water Infrastructure Criteria under the Climate Bonds Standard Background Paper: Background Paper”. London: Climate Bonds Initiative.
Dai, L. and Matthews, J. 2018. “China’s Green Bonds Finance Climate Resilience”. New Security Beat. The Wilson Center. March 22.
Gartner, T. and Matthews, J.H. 2018 “Forests and Wetlands Are Water Infrastructure. New Green Bond Helps Finance Their Protection”. World Resources Institute, May 22.
Matthews, J.H. 2018. “Financing water resilience: the emergence of green and climate bonds for water.” The United Nations World Water Development Report 2018: Nature-based Solutions. United Nations World Water Assessment Programme. Paris: UNESCO.
©Scott Warren
