Climate Bonds Initiative approves new sustainability criteria for hydropower

London — The internationally-recognized Climate Bonds Initiative (CBI) released new criteria for sustainable hydropower March 25 that unblocks significant new financing for the sector globally, industry representatives told S&P Global Platts.

Hydropower is the only major renewable energy source not covered under the Climate Bonds Standard, which is used around the world by bond issuers, governments, investors and the financial markets to prioritize investments that address climate change.

"The urgency of the climate crisis calls for the accelerated adoption of renewable and sustainable energy sources," said Sean Kidney, CEO of the CBI.

"Sustainable hydropower is part of the suite of clean energy options to replace coal, oil and gas generation and help meet future demand for low carbon energy. Certification under the Climate Bond Standard will now provide a best practice guide for investors as to the environmental features of potential hydro investments," he said.

Work on the criteria began in June 2016. The process underwent public consultation in 2019-2020 ahead of approval by the CBI's board in recent days.

The criteria encompass climate mitigation, adaptation and resilience components.

They distinguish between existing assets seeking re-financing, and new assets seeking initial investment.

For existing assets, Issuers must demonstrate a project has either a power density of more than five watts per square meter, or an emissions intensity below 100 gCO2e/kWh.

For new assets, power intensity must be at or above 10 watts per square meter, or emissions intensity below 50 gCO2e/kWh.

"The CBI's new Climate Bonds Standard criteria clears the way for significant additional investment in sustainable hydropower," said Eddie Rich, CEO of the International Hydropower Association.

"Let there be no mistake, these are tough criteria to meet for any energy industry. Whilst the hydropower sector can be proud of being held to the most rigorous sustainability investment criteria for any renewable, we will continue to strive for a level playing field to ensure that good green projects don't get left behind," he said.

New issuance over the next few months would indicate where pent-up demand for hydro investment was geographically, the IHA's head of communications Will Henley said.

While the potential was huge for new development in Africa, Asia and Latin America, there was also potential for refinancing of existing assets in the more mature markets of Europe and North America, he said.