CLIMATE BONDS – WHAT IS IT AND HOW YOU CAN TAKE ADVANTAGE

Certified climate bonds are also known as verified bonds based on the Climate Bonds Standard. In quick summary, climate bonds are a robust and credible standard that lets corporate bonds be linked with low-carbon activities, without needing to compromise on issuers’ credit ratings. Moreover, it shows investors that the issued bonds provide a climate change opportunity. This leads to a broader potential investor in your offer.

After obtaining a climate bonds initiative certification, the issue can show investors that the use of proceeds aligns with the Green Bond Principles and is utilized to deliver a low carbon economy.

The certification is received before bond issuance and offers transparency for investors while showing that all requirements are met to provide a quality product that encounters the growing demand for green and climate bonds.

Use-of-proceeds bonds are currently the most issued Climate Bonds. The raised funds for these bonds are utilized for a specified climate-related asset or program. The issuer guarantees investors that they are investing directly in solutions for climate change issues.

Other types of use-of-proceeds bonds include project bonds, asset-backed securities, and covered bonds.

Certified bonds are used to raise funds for some types of climate change solutions. The Climate Bond Institute (CBI) drew up a list of 11 sectors for certification. All have different criteria that the green bond framework needs to meet and contribute to getting the Paris Agreement goals. 

The Climate Bond Institute continues to boost the possible investment areas and is presently developing criteria for land use, waste management, hydropower, information technology and broadband, shipping, fisheries, agriculture, electricity transmission and distribution grids, and other related infrastructure.

There are different types of organizations that are allowed to issue Certified Climate Bonds. The focus is on meeting the Paris Agreement requirements and consistent with the 2 degrees Celsius warming limit. You can get climate bonds initiative certification from banks, project developers, and the local government.

Organizations are allowed to issue corporate bonds, project development bonds, and portfolio bonds as long as they can meet the requirements for each type.

Based on the view of the bond issuer, the top appeals of bonds is lowering the cost of capital. Think of a businesses with a high return on assets, including hyped stores opening branches rapidly. Through borrowed money on fair terms, the company will open more branches than possible through a loan. 

This leverage enhances their return on equity (ROE), or how much of the loan they can convert into income.

There are many unique benefits that bonds offer. One is precise time cash flow. Through bond ladders and purchasing bonds with scheduled coupon payment dates, you can ensure that a cash payout will come at the right time it’s needed. Moreover, certain bonds possess unique tax aspects. For example, interest earned on bonds is exempt from taxes.

If you’re ready to invest in green bonds, it’s time you start looking for a trusted provider. You can learn more about the climate bonds initiative by visiting bank sites or resource pages.