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Climate Bonds Initiative and Credit Suisse to broaden horizons of green bonds with ‘Sustainable Transition Bonds’ partnership
Credit Suisse and the Climate Bonds Initiative (CBI) today announced they will be working to unlock the power of the capital markets to accelerate the transition to a sustainable and low-carbon economy by promoting a ‘Sustainable Transition Bond’ market.
Marisa Drew, CEO, Impact Advisory and Finance Department at Credit Suisse, said: "We are pleased to be working with the CBI who have been a long recognized leader in standard-setting for the green bond market since its inception and we expect that this partnership will represent an important milestone in the evolution of the green and sustainable finance market. Our aim is to support a transparent, defensible and scrupulous transition market at scale that will be adopted by the financial community with participation from a wide range of legitimate issuers.”
Sean Kidney, CEO, Climate Bonds Initiative remarked: “Every major industry sector & corporation faces the challenge of transition, addressing climate change, zero carbon targets and sustainability. This partnership is about opening further pathways for corporations and investors to accelerate the structural shift in business models and capital markets towards meeting these critical global goals.”
The green bond market has experienced exponential growth over the last few years, as both investors and issuers accelerate their ambition to contribute towards the fight against climate change. However, despite a market size that represents over $600bn in global issuance, the green bond market to date has been populated by a relatively limited universe of highly rated investment grade issuers, primarily from government-related entities, utilities, and financials.
Investor appetite for debt-based issuance that reflects the transition towards sustainability is high and growing daily; however, investors are asking to see a broader range of issuers, expanded uses of proceeds (UoP) and a wider credit spectrum in order to enhance yield and sector diversification within their own ‘sustainable’ portfolios. There is also a strong desire to align their investments with the UN Sustainable Development Goals (SDGs).
At the same time, more and more issuers across industry sectors are looking to incorporate sustainability into their core operations and invest in shifting their business models to better address the climate change challenge. They are also looking at wider impacts across their value and supply chains, including packaging, waste and biodiversity loss. Both Credit Suisse and the Climate Bonds Initiative see the need for an inclusive, open and rigorous process to develop a framework that will underpin a scalable and robust Sustainable Transition Bond market, which will unite the ambitions of these investors and issuers.
Sarah Breeden, Executive Director of UK Banks Supervision at the Bank of England commented: “To reach a carbon neutral economy, all companies in all sectors will need to transition, requiring financing well beyond existing green products. By enabling finance to flow through to this wider range of firms as they seek to transition their businesses, Sustainable Transition Bonds can play a key part in ensuring finance supports this outcome.”
The partnership intends to build on the European Union’s work on a sustainable taxonomy, as well as other emerging green market standards and the UN Sustainable Development Goals. It will undertake the initial groundwork, conceptualization and broad market engagement to develop options for a Sustainable Transition Bond market that can support key industry transition pathways. The aim is to accommodate prospective issuers and investors whose strategic objective is to transition towards low carbon and sustainable business models.
Mary Schapiro, Special Advisor to the Founder and Chairman and Vice Chair for Global Public Policy at Bloomberg LP added: “We’ve seen a growing demand from investors for a wider universe of green and sustainable investment opportunities, alongside the need for consistent and standardized disclosures on transition. The availability of Sustainable Transition Bonds will provide investors with more opportunities to finance corporate efforts to decarbonize.”
This initiative builds on Credit Suisse’s history and commitment to sustainable finance, exemplified by the establishment in 2017 of the Impact Advisory and Finance (IAF) Department, reporting directly to Credit Suisse’s Chief Executive Officer. IAF aims to facilitate projects and initiatives that have a positive economic and social impact while generating attractive financial returns. Credit Suisse is firmly committed to applying our expertise and innovation in the capital markets to help tackle climate change, all while helping our clients ‘Generate returns. Sustainably’.