CBI: Sustainability-Linked Bonds Database Methodology

Climate Bonds Initiative (CBI) published a document describing its methodology behind its Sustainability-Linked Bonds (SLB) Database. SLB tie the cost of financing to sustainability key performance indicators (KPIs), incentivizing or penalizing issuers subject to achieving those metrics.

CBI continuously screens self-labelled debt instruments for inclusion in the Climate Bonds Databases, which is contingent on three conditions being satisfied: i) it must be an eligible debt instrument; ii) it must have an eligible label, meaning it must be self-labelled as a SLB; iii) it must provide adequate public disclosure.

SLBs are a transition instrument to drive decarbonization, and the requirements for inclusion in the Climate Bonds SLB Database focus on decarbonization. The eligibility criteria are based on the relevant parts of Climate Bonds’ Five Hallmarks for Credibly Transitioning Companies: i) Paris-aligned targets; ii) foundation; iii) implementation action; iv) governance; v) external reporting. SLB GHG emission targets must be tied to the emissions source(s) stipulated by their sector-specific pathways. If there is not a relevant pathway available, SLB targets must be tied to all three scopes of emissions, including upstream and downstream scope type 3 emissions, in line with an accredited carbon accounting framework.