Climate Bonds Initiative aims to open taps on low-carbon finance

The development of so-called climate bonds could play a major role in raising the financing necessary to fund the global transition to a low-carbon economy, according to an international think-tank which this week launched a campaign to promote the adoption of climate change-focused financial instruments.

The Network for Sustainable Financial Markets announced that is has teamed up with the Carbon Disclosure Project to undertake research into the policies, best practices and standards that could accelerate the development of climate bonds. The groups said they would also help countries develop proof-of-concept projects and bond issues to demonstrate the effectiveness of the model.

The Climate Bonds Initiative is also backed by an advisory panel, including James Cameron, vice chairman of investment firm Climate Change Capital; Nick Robins of the HSBC Climate Change Centre of Excellence; and Jeremy Leggett, founder of Solarcentury.

Cameron said that bonds have a proven track record of funding the kind of ambitious infrastructure projects that will be required to decarbonise the global economy. "Bonds have allowed us to finance the building of Europe's sewer systems, the growth of America's highway system, and the funding of two World Wars," he observed. "We can now use Climate Bonds to finance the quick, global transition required to head off runaway climate change."

Robins added that the development of new financing instruments would also provide businesses and individuals with a way of navigating the gloomy prognosis that has emerged from much of the Copenhagen talks. "Putting the emphasis on private financing allows a different perspective," he argued. "In place of always talking about the costs of climate change, we can talk instead about investment opportunities."

Sean Kidney, Climate Bonds Initiative convenor, said climate bonds were urgently needed to provide investors with a safe alternative to carbon-intensive investments. "In the wash-up of the financial crisis, fund managers the world over are re-weighting their portfolios towards fixed-interest debt," he said. " But most of the bonds on offer lock institutional investors into the carbon-intensive economy. Discussion with institutional investors such as pension funds has found a large appetite for bond investments related to climate mitigation projects – as long as they first meet accepted risk ratings and rates of return."

The launch of the initiative comes just a week after sustainable banking specialist Triodos debuted a new range of two-, three- and five-year climate change bonds that aim to provide consumers with an easy way of investing in low-carbon projects.