The Climate Bonds Initiative is developing criteria for water projects that can be used to back green and climate bonds certified under the Climate Bond Standard.

A clear understanding of what sorts of investments are consistent with improving the climate resilience of water assets will help bond investors quickly determine the environmental credentials of water-related green bonds and climate bonds.

A new Climate Bonds Expert Working Group developing the criteria for water investments met for the first time this month. The group has been convened by the CBI in collaboration with CERES, the World Resources Institute and Carbon Disclosure Project and includes representatives from organisations including the OECD, Asia Development Bank, Imperial College London, Alliance for Global Water Adaptation, DC Water, Chinese Academy of Sciences and the Stockholm International Water Institute.

The type of investments the group will analyse include clean water projects, water treatment infrastructure, agricultural usage, stormwater management and flood drainage and protection. Additionally, the energy efficiency thresholds for these types of projects required in order for them to qualify for climate bond certification will be established.

“The potential for green bonds in the water sector is enormous. While it may be tempting to define every water project as ‘green’, water investments that don’t take into account climate change, with, for example, its increased volatility of rainfall – dumps and droughts – will come to be seen as both higher risk and not consistent with green,” chief executive of the CBI Sean Kidney said.

“Currently, climate relevance is not clear for water projects; some of them may actually perpetuate high water consumption or poor water management with high energy usage. This makes the need for guidelines even more urgent – investors will want to be sure that investments don’t make matters worse.”

Cate Lamb, head of water at CDP, said that “managing our water needs is, in effect, the climate adaptation challenge”.

“CDP views the development of the Climate Bond Standard for water infrastructure as a critical step in transitioning confidently and meaningfully to a low-carbon, climate resilient economy,” Ms Lamb said.

Trucost approved as Climate Bond verifier

Environmental data provider Trucost has also been confirmed as an approved verifier under the Climate Bonds Standard of the CBI.

Other firms able to provide assurance green bonds are Climate Bond Certified are Oekom Research, Bureau Veritas, KPMG, DNV-GL, TUV Nord and EthiFinance.

Trucost has a substantial track record in verifying sustainability claims, having analysed the sustainability reporting of 4500 of the world’s largest listed companies.

“Robust verification is crucially important to ensure confidence is maintained in the rapidly growing green bond market,” Trucost chief executive Richard Mattison said.

“This is an opportunity for Trucost to use its 14 years of expertise in natural capital valuation to help investors and green bonds issuers quantify and communicate the environmental benefits of complex projects in a holistic way.

“Trucost is delighted to be working with the Climate Bonds Initiative and supporting the excellent work they’re doing in mobilising bond markets for climate change solutions.”