Green bonds and hydropower

Green bonds direct investment towards renewable energy projects, but continued uncertainty over qualifying criteria for hydropower is stifling the sector’s access to this growing market. 

An innovative investment instrument, green bonds are fixed income loans for the finance and refinance of projects and assets that help address environmental and climate risks.

The green bond market has grown rapidly in recent years, from US$11 billion of issuances in 2013 to more than a trillion dollars in 2023. Issuance of impact bonds totalled US$939bn in 2023, up 3% on the same period last year.

In 2023, green bond sales from corporates and governments rose to US$575bn, just more than the US$573bn two years earlier.

This is helping to shift much-needed investment towards a low carbon, sustainable economy.

Some issuers have however excluded proceeds from green bonds being used to finance or refinance hydropower projects due to a lack of clarity over appropriate sustainability standards.

The International Hydropower Association (IHA) is working with partners to agree recognised eligibility criteria for green bonds to fund hydropower projects.

We are seeking international agreement on climate compatible criteria for hydropower projects,  approved by the Climate Bonds Initiative (CBI) and stakeholders, and accepted by the hydropower sector.

As part of the CBI’s Hydropower Technical Working Group (TWG) we are working with partners to develop the criteria covering climate mitigation, climate resilience and adaptation and adherence to broader environmental, social and governance good practice. Since its formation, the TWG has made substantial progress in developing the eligibility criteria, which are expected to be released in 2020.

IHA’s contribution draws upon the tools and guidelines which we have developed such as the Hydropower Sustainability Standard. The tool provides an action plan to help developers address any gaps against international good practice.

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