Climate bonds are increasingly being certified, but while all the Big Four firms are approved verifiers under the Climate Bond Standard, so far only EY and KPMG have taken such engagement, albeit at the smaller end of spectrum with issuers favouring other verifiers for the larger bounds.
The issuer engages a verifier to check that the projects and assets financed are eligible, and to check that internal processes and controls are established to track how the bond is used and produce regular reports.
Most recently, hydropower operator China Three Gorges Corporation (CTG) has issued its first offshore green bond with verifier EY, raising €650m for wind projects in Germany and Portugal for seven years. EY has provided an external review and issued an assurance report on the issuance. This latest bond follows in the footsteps of others who have tapped international green bond markets with Big Four firms being selected as verifiers.
EY, KPMG, Deloitte and PwC all approved verifiers have the capability to verify worldwide with the technical scope across all sectors. Out of 51 organisations listed with certified climate bonds eight are verified by KPMG and seven have been verified by EY. Sustainalytics had verified the most bonds, 15 out of the 51.
The value of the bonds verified by the Big Four firms varies between small to mid-sized bonds of US$ 44m and US$ 492m, therefore both KPMG and EY are handling some of the larger bonds but not the largest.
Sustainalytics, DNV GL, and Oekom verified the largest of the climate change bonds, varying between $ 500m and $ 1,065m, for the largest climate change bond listed.
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Certification under the Climate Bonds Standard, approved by the Climate Bonds Standard Board, is currently available for solar, wind, geothermal, low carbon transport and low carbon building projects and assets. The growth of bond markets provides increasing opportunities to finance the implementation of the Sustainable Development Goals and other green growth projects.
Certification is increasingly being adopted in major green bond markets as Australia now has 100% certified climate bonds, followed by 59.6% certified in India, and less than 26% in European countries such as Germany, France and the Netherlands.
The Climate Bonds Standard and Certification Scheme also provides detailed guidance and procedures for approved verifiers to conduct third-party verification of green bonds to reduce the effort and costs for issuers and verifiers.