Financing Low - Carbon Materials Through Green Bonds : Proposing Criteria and Benchmarks for Green Bonds in the Aluminium Sector

Abstract: Reducing emissions in the basic materials sector, which account for 25% of the global greenhouse gas emissions is a pressing climate mitigation task. Investments into decarbonising this sector are critical and therefore raising capital though climate finance is gaining attention. Green bonds are a new asset class that incorporate sustainability criteria into bonds. Despite the increasing use of green bonds, there are no criteria for this instrument for the materials sector. The lack of criteria inhibits much needed investments, risks environmental integrity, and facilitates greenwashing. This thesis aims to propose effective and transparent criteria for green bonds in the materials sector. The research question and methodology have been developed with a research group at the DIW Berlin. To investigate the question, the aluminium sector has been chosen as a case study. This research draws on elements of the green bond taxonomy by the Climate Bond Initiative and CICERO. As a result, this thesis proposes two complementary sets of green bond criteria for the aluminium sector: one focuses on management strategies and disclosures, and a second set focuses on technological mitigation options. This paper further finds that academic literature on developing criteria for green bonds is largely lacking and urgently requires more attention, so that the potential of this new asset class can further explored.