Climate Bond Standard launches shipping criteria for bonds

The International Climate Bonds Standard (CBS) has launched its shipping criteria, providing a definition to evaluate whether a shipping project contributes to climate change mitigation as a basis for certification for climate bond status.

The criteria provide guidance on how companies can the performance of their assets and their business lines towards zero-carbon. The shipping criteria expand the sectors available under the Climate Bonds Standard and Certification scheme, which has now passed US$135 billion in certifications.

"The journey to sustainable shipping requires collaboration by like-minded peers across the shipping value chain," said Andrew Stephens, Sustainable Shipping Initiative, executive director. "The Climate Bonds Standard's newly launched shipping criteria will provide clear guidance to financial stakeholders, enabling them to leverage their influence in the industry and drive the transition to climate-aligned shipping investments."

The criteria require that ships are not primarily dedicated to transporting fossil fuels and are either zero-emission ships at the point of application for certification or performing below the average operational emissions intensity of their respective size and class throughout the tenor of the bond. In the latter case, such ships must also provide a managed reduction plan outlining how the ship will continue to transition towards zero-emissions, Climate Bonds Standard said.

"The shipping sector has an opportunity to rapidly transition towards zero-carbon emissions," said Sean Kidney, CEO, Climate Bonds Initiative. "The introduction of the shipping criteria to the Climate Bonds Standard opens up another science-based investment pathway for capex to be applied in this sector and delivers a range of positive environmental impacts."

The shipping criteria were developed via a technical working group process with Tristan Smith and Sophie Parker of University College London as lead technical consultants.  The technical working group was supported by an industry working group to develop the criteria, which align with the trajectory of carbon emission reductions required under the Paris Agreement.

"The CBS shipping criteria provide climate credibility to green bonds by assessing whether shipping assets are climate-aligned based on both the emissions intensity of the asset over its lifetime and the cargo it carries," said Sophie Parker, principal consultant, UMAS International. "By requiring issuers to consider how the asset will stay aligned with a trajectory to zero-emissions by 2050, the criteria provide more transparency to the market, so that financiers can make informed decisions about how their assets will contribute to climate action and mitigate the climate risks that could affect the valuations of their assets."

The Climate Bonds standard is an overarching science-based, multi-sector standard overseen by the Climate Bonds Standards Board that allows investors and intermediaries to easily assess the climate credentials and environmental integrity of bonds and other green debt products.  Launched in 2011, with periodic updates, the Climate Bonds Standard is the most detailed, climate aligned investment criteria available in the market and provides guidance to issuers, investors, governments and regulators.

Climate Bonds Certification framework has been designed to work in parallel with the normal process for issuing bonds, loans or other debt products. It has 2 phases, Pre-Issuance or Post-Issuance. Certification of a Climate Bond at the pre-issuance phase enables the issuer and underwriters to market the bond or debt product as Certified. Further assurance activities in the post-issuance phase must be undertaken to maintain the Climate Bonds Certification.

Read more: International Climate Bonds StandardClimate Bonds InitiativeClimate Bonds Standards BoardSean KidneySustainable Shipping Initiative
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