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CLIMATE ROUNDTABLE - TOWARDS A GREENER FUTURE
Climate change is higher on the agenda – both in the private
and public sector – than many people are aware of. CICERO is
an independent and interdisciplinary research institute, and
our mission is to acquire knowledge that can help mitigate the
climate problem and enhance climate cooperation. One of the
areas where CICERO has specialised is green bonds. Our climate
finance team provides independent second opinions on green
bonds and conducts research on climate finance.
Finance is the key means to support the implementation of
climate change mitigation and adaptation activities. The demand
for financial instruments that account for climate-related risks is
rapidly growing, in parallel with the need for robust and concise
information regarding the environmental impacts of investments.
Rapid growth of green bonds
Green bonds are a particularly promising instrument for financing
low-carbon and climate-resilient infrastructure projects. Essentially,
a green bond is a debt instrument that finances projects that are
environmentally-friendly. The green bond market is growing rapidly
– new issuances of green bonds tripled in 2014 to $35 billion.
However this is still only a fraction of a percent – 0.04% – of the
total global bond market.
To date, most green bonds have been issued by development
banks, but interest from the private sector is increasing, with the
first issuance by a corporation in 2013. Municipalities are also
becoming more active in issuing green bonds. Most of the green
bonds have been issued in Europe, North America, and Asia.
In Norway, several green bonds have been issued, including by
Kommunalbanken, BKK and NTE. The Oslo Børs established a
separate green bond listing in January – the first stock exchange
in the world to do so. One of the requirements for a green bond
to be listed on Oslo Børs is the use of a publically-available
second opinion.
Environmental quality
However, there is no environmental standard for what constitutes
a green bond. Many investment banks are signatories to the
Green Bond Principles, which focus on earmarked use of
proceeds and for green projects and transparency, but say little
about environmental quality.
To increase investor confidence that investment decisions are
taken with careful consideration of environmental risks,
By Kristin Halvorsen
Director at CICERO, Center for International
Climate and Environmental Research, Oslo
Climate finance
to tackle climate change