Certifying the 'Climate' in Climate Bonds

20 Pages Posted: 4 Sep 2018 Last revised: 5 Apr 2021

See all articles by Paul Rose

Paul Rose

Ohio State University - Moritz College of Law; Bocconi University - BAFFI Center on International Markets, Money, and Regulation; Tufts University - The Fletcher School of Law and Diplomacy; FundaciĆ³n Instituto de Empresa, S.L. - IE Business School

Date Written: September 4, 2018

Abstract

The market for climate bonds is expanding quickly, but the continued vitality of the market will depend in large part of the quality of the reviews and assurances provided by climate bond verifiers, who assure that the bond proceeds will be used to fund climate-related projects. The Climate Bond Initiative (CBI), a self-regulatory organization that promotes the climate bond market, employs an existing regulatory framework (ISAE 3000) to manage potential conflicts of interest. However, additional steps may help the climate verification market develop and maintain credibility. Because CBI has adopted an issuer-pays model, CBI should consider encouraging the use of entity forms by climate verifiers that either limit profit incentives (such as mutual, cooperatives and non-profits) or that encourage attentive risk management (such as general partnerships).

As the climate verification market matures and an oligopoly of verifiers emerges, CBI should consider allowing investors and issuers to pursue claims against climate verifiers for poor quality verifications.

Keywords: climate finance, climate bonds, green bonds, sovereign bonds

JEL Classification: K2, K22, K33

Suggested Citation

Rose, Paul, Certifying the 'Climate' in Climate Bonds (September 4, 2018). CAPITAL MARKETS LAW JOURNAL, Volume 14, Issue 1, January 2019; Ohio State Public Law Working Paper No. 458, Available at SSRN: https://ssrn.com/abstract=3243867 or http://dx.doi.org/10.2139/ssrn.3243867

Paul Rose (Contact Author)

Ohio State University - Moritz College of Law ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States

FundaciĆ³n Instituto de Empresa, S.L. - IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

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