Sustainable Finance Goals
We identify best practices in each sector that align with these goals while also taking into consideration the overarching environmental rules, anti-discrimination and civil rights laws, and permitting procedures that issuers are required to meet. We call these best practices “material factors” and they reflect the beneficial impact of a bond, including if it is consistent with a pathway toward low greenhouse gas emissions and climate-resilient development. When we review bonds, we identify whether sector-specific best practices are present in bond-financed activities.
Transition to a decarbonized economy
In every sector, there are ways to decarbonize and best practices to reduce greenhouse gas emissions. Our data reveals the presence or absence of these best practices which indicate if investments are transition-aligned.
Integrate resilient and sustainable design features
Infrastructure should be designed for resilience to diverse risks, ranging from coastal inundation, flooding, severe weather events, drought, and biodiversity loss. Energy efficient buildings are key to a low-carbon future.
Preserve, enhance, or restore natural capital
The UN has declared a biodiversity state of emergency. Depletion and lack of stewardship of water, soil, air, plants, and animals is widespread and is intimately linked to the changing climate. Ecosystem services, food security, human health, and community well-being all hinge on sound and restorative management of natural resources.
Promote an equitable society and a just transition
Inequalities are present in many forms in the US and will continue to incite hardships without comprehensive changes to policies and activities prioritized for financing.
Disclose activities, impacts and risks
Transparency ensures accountability to constituents and investors alike. Without adequate disclosure regarding financed activities and intentionality of those activities against sustainability targets, it is impossible to collaboratively overcome society’s most pressing challenges. Reasonable market participants consider climate risk to be material, but materiality includes more than direct impacts from extreme events that might affect an issuer’s ability to repay. Materiality also encompasses the long-term sustainability (durability) of the bond-financed infrastructure in the face of changing conditions, and the issuer’s efforts to plan for and mitigate those risks on the bond-financed activities.