In summary

Just two days into COP26, the state sold its first ever climate-certified bond for more than $465 million.

Profile Image

By Michael Paparian, Special to CalMatters

Michael Paparian is a former deputy state Treasurer and serves as senior adviser to the London-based Climate Bonds Initiative, a nonprofit that provides climate certifications to bonds worldwide.

If you’re a fan of platitudes, promises and pledges, you weren’t disappointed in the U.N. Climate Change Conference in Glasgow, Scotland. But at least one significant positive action by the state of California went largely unnoticed.

In fairness, COP26 overall was viewed as a modest success, but it fell well short of what we need to do to combat climate change, making positive actions taken by governments such as California even more important to not only showcase but to emulate elsewhere.

I was among the 30,000 in attendance, and California was well represented. The state is treated in many circles like a major country. Though Gov. Gavin Newsom cancelled his trip at the last minute, the lieutenant governor and dozens of other California administration officials, legislators, scientists, activists and others were there. 

California has much to be proud of in accomplishments and planned actions. During COP26, California pledged to stop selling gas cars by 2035, joined a coalition pledging to phase out fossil fuels and touted the many policies and programs that make California a climate leader.

But most of the California leaders at COP26 missed one of the most significant accomplishments of Newsom’s administration.  

Just two days into COP26, the state sold its first ever climate-certified bond for more than $465 million. In doing so, the state confirmed that a major infrastructure project is fully aligned with the climate goals of limiting global warming to 1.5 degrees centigrade or less. The certification is hard to come by and is backed by scientifically credible analyses that a project is climate friendly and consistent with the infrastructure we need in the climate-challenged world.

Bonds are used to fund infrastructure projects, from water and wastewater facilities to transportation systems to schools, hospitals, buildings and much more. However only a small, but growing fraction of the $450 billion in annual state and local bonds in the U.S. are labelled green. And an even smaller fraction is climate certified.

The project financed by the recent climate certified bond is the new California Natural Resources Agency building. Not only will it be among the greenest office buildings ever built, it will use “zero net energy.”  In other words, through an agreement with the Sacramento Municipal Utility District to use solar energy, the building will produce as much renewable energy as it uses.

Investors recognize that, for term stability, they need to steer their funds toward climate friendly projects. Green bonds verified by an independent third party provide one signal of climate friendliness. A green bond that is also climate-certified shows investors that the project has been fully and rigorously vetted for climate impacts.

By joining this growing list of climate-certified bond issuers, including LA Metro, BART, Stanford University, the San Francisco Public Utilities Commission and others, the state is demonstrating one more commitment to climate solutions.  Given the seriousness of the climate threat, at some point soon all infrastructure projects should be climate friendly and all bonds used to finance those projects should be climate certified.

The state is the largest issuer of government bonds in the country. Municipalities and other states look to California for indications of what they should do in the marketplace. By issuing a climate certified bond, California is showing that everyone should integrate their infrastructure, climate and financial policies.

For many, bonds are a boring topic. But as society moves toward climate solutions, we should be sure that, when we finance infrastructure, those projects should contribute to a healthier climate. Newsom deserves credit for doing so with the recent bond issuance and has set the precedent for stronger linkage between climate and finance in the future.

Hopefully Newsom will build on this financial precedent. As state Treasurer Fiona Ma said, the Natural Resources Agency bond “puts a public face on California’s efforts to lead the discussion on climate change through innovative public finance.”

We want to hear from you

Want to submit a guest commentary or reaction to an article we wrote? You can find our submission guidelines here. Please contact CalMatters with any commentary questions: