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S&P adds forestry to global ratings of green projects

December 16, 2019  By P&PC Staff

S&P Global Ratings has expanded its Green Evaluation program to include forestry, as well as agriculture and waste.

The Green Evaluation has also added the analysis of 30 additional technologies, such as cogeneration (biomass-based) and fuel cells as part of the renewables analysis and improved irrigation as part of water analysis.

“By expanding the scope of our Green Evaluation, we are offering the market a means to establish the environmental benefit of such investments, not only in their own right, but against others within the sustainable finance space,” says Michael Wilkins, head of sustainable finance, analytics and research, S&P Global Ratings.


Since its launch in April 2017, the Green Evaluation, which represents an external review and second opinion under the Green Bond Principles, has been applied to 47 green transactions in the public domain representing over $37 billion of evaluated debt.

Green bonds issued for sustainable agriculture and forestry grew over thirty-fold to US$7.4 billion in 2018 from US$208 million in 2013. Despite this growth, issuance is still small relative to other sectors such as renewables, energy efficiency and clean transport.

Green bond issuance across all sectors is expected to total around $230 billion in 2019 and cumulative issuance stands at around $744 billion, according to the Climate Bonds Initiative. Scaling up green finance for the agriculture and forestry sector is a key ambition of the UN climate change summit (COP25) that wrapped up in Madrid on Dec. 13.

“We view the green bond market as a potential large-scale enabler for investment into the sustainable land use sector. This is crucial given that land use represents 23 per cent of all global greenhouse gas emissions,” Wilkins says.

A Green Evaluation is based on three scores – a transparency score weighted at 15 per cent, a governance score weighted at 25 per cent, and a mitigation score (environmental impact) or adaptation score (resilience level) weighted at 60 per cent. S&P evaluates a financing against each category and then combine the resulting scores into a final Green Evaluation on a scale of 0-100.

S&P calculates the mitigation score in two steps: first, by estimating e a technology’s positive and negative environmental impact compared to a baseline scenario to determine its net environmental impact overall compared with other technologies in the same sector. This is called a net benefit ranking, expressed as a score between 0-100. The net benefit ranking is a weighted average of the technology’s net benefit rankings for each environmental KPI. The weighting of each eKPI reflects its materiality. A technology can have up to three eKPIs.

Second, after determining the technology’s net benefit ranking, S&P applies its hierarchy. This places the final mitigation score within the broader context of different sectors. In effect, this limits the mitigation score that projects or portfolios with potentially un-captured negative effects are able to achieve.

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