Certification for hydropower climate bonds is now formally available for issuers of green debt products across all markets.
This is made possible through the Climate Bonds Standard Board (CBSB) approving the new Hydropower Criteria under the International Climate Bonds Standard (CBS), providing screening criteria for investments in sustainable hydropower projects.
Under the new Hydropower Criteria, the issuer must demonstrate the following to the Verifier:
- Demonstrate it has a high-power density or a low emissions intensity: recording either a power density of more than 5W/m² or an emissions intensity of less than 100 gCO2e/kWh if the facility was operational pre-2020, and either a power density of more than 10W/m² or an emission intensity of less than 50 gCO2e/kWh if the facility became operational in 2020 or thereafter.
- Undertake an official assessment using the ESG Gap Analysis Tool (HESG), one of the Hydropower Sustainability Tools. The assessment must be carried out by an accredited assessor, be publicly available, and demonstrate:
- No more than 10 gaps in total against international good practice.
- No more than 2 gaps in each section.
The majority (>50%) of the gaps must be closed within 12 months and the remaining within 24 months. Projects of all sizes, types (including pumped storage), and in all locations, will be eligible, provided they meet the hydropower criteria.
Climate bonds already underway
A number of issuers have already issued green bonds to finance or refinance hydropower projects. Considering the potential negative impacts of the specific assets and projects linked to those green bonds it is necessary to ensure consistent and credible guidance is available to investors who wish to channel funds into green bonds linked to hydropower.
The Criteria determine a robust and transparent screening to ensure that investments are ‘climate compatible’, therefore being sufficiently low carbon and enabling greater climate adaptation and resilience in a world of unavoidable climate change, in line with the goals of the Paris Agreement, and do not cause significant harm in respect of a number of wider environmental or social issues.
Sean Kidney, CEO of the Climate Bonds Initiative, commented: “The urgency of the climate crisis calls for the accelerated adoption of renewable and sustainable energy sources. Sustainable hydropower is part of the suite of clean energy options to replace coal, oil and gas generation and help meet future demand for low carbon energy.”
Kidney explained that the Certification under the Climate Bond Standard will provide a best practice guide for investors as to the environmental features of potential hydro investments.
The Hydropower Criteria encompasses the broad components of climate mitigation and climate adaptation and resilience.
The Criteria were developed through a Technical Working Group (TWG) process that included representation from WWF, AGWA, IIED, IUCN, IHA and others, was reviewed by an Industry Working Group (IWG) and underwent a public consultation process in 2019-2020.