Climate resilience principles. A framework for assessing climate resilience investments

Losses due to weather-related events have increased nearly ten-fold over the last 40 years, from a ten-year global average of USD 12 billion in 1980 to USD 119 billion today. To combat spiralling losses from climate impacts, an estimated USD 200 billion globally will be required annually within twenty years. The accelerated deployment of various sources of finance, including green bonds, is urgently needed.

To this end, in October 2018, the Climate Bonds Initiative (CBI) convened the Adaptation and Resilience Expert Group (AREG) to design a set of principles that would guide the integration of criteria for climate adaptation and resilience into the Climate Bonds Standard. The Climate Bonds Standard & Certification Scheme for green bonds was established in 2015 to provide guidance to issuers and provide assurance to investors on green bond credentials in a voluntary market. To date, 15% of all green bonds issued globally (by value) have been certified under the Climate Bonds Standard & Certification Scheme.

Until now, the Standard & Certification Scheme has focused primarily on greenhouse mitigation, and to be eligible for certification, a green bonds’ use of proceeds needs to meet the sector-specific greenhouse gas Mitigation Criteria. These Criteria screen for assets and projects compatible with a low-carbon trajectory necessary to meet the goals of the Paris Agreement. While the Standard includes Climate Resilience Criteria for some sectors, these have been developed by different groups of experts and therefore lack consistency across sectors.

This document is therefore intended for a wide audience, including but not limited to bond issuers, investors and other stakeholders seeking guidance on:

• The potential range and type of climate resilience investments

• How to define and assess physical climate risks

• How to credibly demonstrate climate resilience outcomes

For these Principles, the focus has been on investments that address physical climate risks. This enables us to put a firmer boundary around the climate resilience risks that might be addressed and benefits that might be delivered through these investments for the purposes of providing guidance for bonds seeking certification under the Climate Bonds Standard. It is noted that addressing these physical climate risks will require not just investments in hard infrastructure, but also increased investment in ‘soft’ areas such as technologies, services, supply chain management, operations etc. that have a key role to play in enabling climate resilience in ecosystems, economies and societies.