Carbon Yield Insights: Measuring the GHG Emissions Avoidance of Green Bonds

Carbon Yield Insights: Measuring the Greenhouse Gas Emissions Avoidance of Green Bonds

SEPTEMBER 28 2018

The historic Paris Agreement is a global effort to limit the human-induced global temperature increase from pre-industrial levels to two degrees Celsius within this century. Critical to meeting the Paris Agreement is a meaningful and significant reduction in greenhouse gas (“GHG”) emissions globally.

Since their emergence in 2008, green bonds appear as a viable potential scalable solution to fund climate change mitigation and adaptation projects – growing to over US$340BN in terms of amount outstanding. The vast majority of green bonds fund mitigation-related activities, making them a powerful tool for supporting the Paris Agreement. The scale of mitigation, however, can vary greatly across green bonds and their funded activities.

The question therefore arises: how to provide transparency and information to investors and policymakers about the climate change mitigation potential of diverse projects to guide allocation of capital to optimise for GHG abatement? To attempt to remedy such information asymmetry, the Carbon Yield initiative was launched in 2016 to help measure the climate change mitigation impact of green bonds.

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