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The Climate Bonds Initiative (CBI), an international organization that certifies use-of-proceeds bonds has launched a consultation exercise to expand certification for sustainability-linked bonds (SLBs). SLB’s differ from green, social and sustainability bonds wherein they are not use-of-proceeds bonds but have certain stated targets/KPIs to be met. The CBI plans to certify only SLBs and issuers that are aligned with the Paris Agreement, or who will be aligned by 2030. This would imply that they are on the path to limit global warming to 1.5°C by 2050. SLBs are typically guided by ICMA’s SLB principles, which do not require the KPIs to be Paris-aligned. The update from CBI thus tightens the criteria on issuers to get their SLBs certified. MSCI ESG Research shows that only 11% of companies were aligned with a 1.5°C temperature rise in June 2022. Some market participants note that CBI’s potential involvement in SLBs would improve market guidance and expectations, enhance credibility, and help grow the market.
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