The Investor Group on Climate Change (IGCC) has joined the International Climate Bond Standards Board to support a program that is developing industry-wide standards for green bonds.
The program is expected to launch its first standard within weeks, and under the program a certificate will be issued to bonds that are backed by assets meeting the board's requirements.
"The transition to a low-carbon economy requires a wide range of energy and infrastructure investments," IGCC chief executive Nathan Fabian said.
"Our engagement with the Climate Bond Standards Board is about the investment community taking the lead in identifying appropriate investments.
"We are looking for investment-grade returns that also address climate change. We challenge industry and government to now provide the investment opportunities we need to both deliver secure pensions for our members and address the long-term systemic threat of climate change."
The organisation, which represents Australian and New Zealand institutional investors with about $600 billion in funds under management, said without standards the quality of investment would quickly deteriorate and would end up in a race to the bottom.
According to the Climate Bonds Initiative, which is leading the standard development program, about $12 billion of bonds backed by investments related to climate change solutions had already been issued internationally.
This growing market would provide institutional investors with opportunities to switch from carbon-intensive to low-carbon investments and fuel the growth of the low-carbon economy, the organisation said.
"According to the International Energy Authority, we need up to a trillion dollars a year to be flowing into low-carbon industries if we're to avert catastrophic climate change. That money will come largely from bond markets," Climate Bonds Initiative chairman Sean Kidney said.
"Standards will provide an international tool for investors and governments to assess the integrity of green investments and to preference them. It will support liquidity with green portfolios, essential for investors today."
