Hydropower can now qualify for climate bond financing under new criteria

25 March 2021

Sustainable hydropower projects can now qualify for climate bond financing if they meet strict criteria unveiled today by the Climate Bonds Standard Board (CBSB).

The CBSB has approved the Hydropower Criteria under the International Climate Bonds Standard (CBS), providing screening criteria for investments in sustainable hydropower projects. Certification for hydropower is now formally available for issuers of green debt products across all markets.

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. 

The Hydropower Criteria and encompasses the broad components of:  1) Climate mitigation; and 2) Climate adaptation & resilience. 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 5 W/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 10 W/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),(link is external) 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; and 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 

"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 & gas generation and help meet future demand for low carbon energy,” said Sean Kidney, CEO, Climate Bonds Initiative. “Certification under the Climate Bond Standard will now provide a best practice guide for investors as to the environmental features of potential hydro investments."

The launch of Climate Bonds Standard criteria for hydropower paves the way for a “new era” for green investment in renewable energy and will help accelerate global decarbonisation efforts, said the International Hydropower Association (IHA).

 “Until now, however, the lack of specific hydropower climate bond criteria has meant that most issuers have either excluded hydropower or limited investments to small-scale projects,” explained Eddie Rich, Chief Executive for IHA. “The CBI’s new Climate Bonds Standard criteria clears the way for significant additional investment in sustainable hydropower. It provides the clarity and assurance that investors, governments, the industry, as well as local communities, have demanded for years. To qualify, new and existing projects must now assess their environmental, social and governance (ESG) performance and report a low carbon footprint.  

“Let there be no mistake, these are tough criteria to meet for any energy industry. Whilst the hydropower sector can be proud of being held to the most rigorous sustainability investment criteria for any renewable, we will continue to strive for a level playing field to ensure that good green projects don’t get left behind. Nonetheless, this marks the beginning of a new era for investment in sustainable hydropower.” 

The Climate Bonds Initiative (CBI) is an international investor-focused and not-for-profit organisation working solely to mobilise the US$100 trillion bond market for climate change solutions. To-date, worldwide green bond issuances have reached over US$1 trillion.  


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