Sean Kidney: Mobilising Green Finance

Making a green bond market 

Green bonds are set to reach a new 2021 forecast of USD500bn.  They were already at USD354.2bn at end Q3 2021[1].  S&P calculates that from 2013 to 2020 the global green bond market grew tenfold, making it now more than 3% of all municipal bond issuances[2].

That is impressive growth in a market that is driven by numbers not social impact.  Sean Kidney, CEO of the Climate Bonds Initiative, has been one of the leading advocates, working with government and the finance industry to make this happen.

That has required more than numbers.  It has involved bringing about a shift in thinking and practice in the bond markets, first to canvas and assess, and then to adopt green bonds.  It is a work-in-progress.  The market has a way to go yet.

Climate Bonds Initiative

Climate Bonds Initiative (CBI) is an investor-focused, not-for-profit, international organisation working solely to mobilise the largest capital market of all, the $100 trillion bond market, for climate change solutions.

CBI is global.  It works with the investment and banking community in 30 countries around the world.

CBI’s stated aim is to reduce market friction and improve risk differentiation for green investments. That involves advocacy around standards, issuer support for bond market development, and policy interventions that promote green finance solutions.

It talks to governments.  It talks to banks.  It talks to major institutional investors.  All at senior policy levels.

And it gets into the detail.  It works on green bond definitions and certification schemes, providing comprehensive market data and analysis, and green bond market development programs in multiple jurisdictions, from the G8 to developing economies.

Key to CBI’s success in mobilising green finance has been the development of objective, verifiable standards and a robust certification process so that financiers and investors can be satisfied that their green bonds really are green.

Legislation around creation and spread of the EU Taxonomy

One of the major legal milestones has been the adoption of the EU taxonomy – the European Union’s 2019 Green Deal legislation for transforming European markets from fossil dependency to complete decarbonization by 2050.

This level of climate neutrality is expected to require funds to the extent of at least one trillion Euros.

This is where Sean and CBI’s work comes to the fore.

One the one hand, relentless advocacy highlighting the urgent need for the finance industry to respond to the opportunity and obligation to drive real action on climate change.

On the other, providing the data, framework and analysis that enables the finance industry to work out what rating should be given to that particular energy project or that particular piece of industrial innovation or the myriad of other financing opportunities, and guiding the pricing and distribution accordingly.

Making an impact

How does someone from downtown Sydney, Australia find themselves leading the finance industry response to climate change?  Clearly some special skills in stakeholder communications, social change strategy and issues marketing, combined with pension fund experience and expertise.  But above all commitment, passion and tireless energy.

Fathering the daughters of green bonds

While green bonds as a whole have grown by leaps and bounds, there are further iterations of these same bonds now developing in the form of social, sustainability, and even pandemic bonds (especially in the context of COVID-19).

The development of these “daughters of green bonds” has undoubtedly been shaped and promoted by the transparent and robust framework of the green bond market that Sean and CBI have helped build.

As a social finance champion, that is quite a legacy for Sean to leave the next generation.