What’s an obligation ? It is a “debt investment in which an investor loans money to an entity which borrows the funds for a defined period of time at a variable or fix interest rate”.
A climate bond is a bond used to finance projects needed to address climate change. They range from waste management and improving resiliency to renewable energies. Launched for the first time by the European Bank of Investment, in 2007, the number of climate bonds emitted keeps rising. In 2014, there were three times more climate bonds than there were in 2013. They currently represent $36 billions. These bonds have mainly been issued by large corporations, multilateral development banks and some asset-backed bonds. A diversification in the bonds issuers has to be noticed : more and more private companies seem to be interested by the project.
To be defined as “green” or “climate”, a bond has to fulfill some standards. The Climate Bonds Initiative, the World Bank are working on an universal taxonomy with criteria such as low-carbon activities, waste management or energetic efficiency. For the moment these criteria are essentially based on technical aspects and don’t include economic, societal or environmental issues in their large acceptations.
The bonds market currently represents $100 000 billions. According to the Climate Bonds Initiative, $500 billions of them could be climate friendly. It would be an efficient and secure way to fund the fight against climate change !