Climate Transition Bonds, also known as Climate Bonds, are financial instruments designed to support sustainable development goals. They are part of a broader category of corporate bonds but have a specific focus on promoting the transition from traditional production and consumption models to a low-carbon economy.
What are Climate Transition Bonds?
These bonds involve the issuer’s commitment to develop and implement a science-based climate transition strategy. For example, the strategy may align with the standards of the Science Based Targets Initiative, which provides scientific guidelines for achieving long-term climate goals.
Regulation and Issuance Stages
The issuance of such bonds in Russia is regulated by the Bank of Russia’s Regulation No. 706-P dated December 19, 2019, “On the Standards for the Issuance of Securities.” The issuance process includes several key stages:
- Feasibility Assessment: Analysis of the economic and environmental necessity of issuing bonds.
- Development of a Climate Transition Strategy: Creation of a strategy based on scientific data and in accordance with international standards.
- Verification Procedure: Confirmation that the activity’s target indicators align with an internationally recognized climate change scenario and the achievability of these indicators.
- Preparation of Issuance Documentation: Compilation of all necessary documents for bond issuance.
- Preliminary Registration: Submission of documents for preliminary review.
- Addressing Comments and Preparing Final Versions: Making changes based on the regulator’s comments.
- Bond Issuance: Final registration and issuance of the bonds.
Additional Obligations and Information Disclosure
The issuance decision also specifies the consequences of not achieving the target indicators and the issuer’s obligations to disclose information about the implementation of the climate transition strategy. This includes the volume, timing, and method of information disclosure. The issuer is required to inform investors about the achievement or non-achievement of the target indicators and provide verification results.
Current Situation in Russia
At the time of writing, climate transition bonds have not yet been issued in the Russian Federation. However, this instrument represents a promising direction for sustainable development financing and could accelerate the transition to a low-carbon economy in the future.
Conclusion
Climate transition bonds are an important step towards sustainable development. They require issuers to have a clear and scientifically-based strategy and to strictly adhere to international standards. This makes them a reliable instrument for investors interested in supporting environmentally responsible projects
