S&P plans green bond analysis tool

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S&P Global Ratings is planning to launch a green bond analysis tool as it anticipates financing of £1trn to meet politicians’ ambitions to address climate change.

The Green Bond Evaluation tool will analyse the environmental impact of projects funded by bonds and will be based on transparency, governance and the mitigation or adaption to adverse environmental outcomes.

“Our proposed Green Bond Evaluation methodology looks beyond the governance and management of a bond by providing an analysis and estimate of the environmental impact of the projects or initiatives financed by the bond’s proceeds over its lifetime relative to a local baseline,” says S&P Global Ratings head of environmental and climate risk research Michael Wilkins.

The International Energy Agency estimates financing of $1trn globally will be required by 2050 to meet the Paris Agreement’s target of limiting the rise in global temperatures to no more than two degrees above pre-industrial levels.

The scale of financing required has resulted in the development of new finance instruments to direct investment towards projects that mitigate climate change and improve resilience, S&P says. 

Wilkins says there is a growing interest in information related to these instruments as a result.