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The document explains that green bonds are fixed-income instruments where proceeds are earmarked for projects with environmental benefits, such as renewable energy and energy efficiency. It details four main types of green bonds—'use of proceeds' bonds, revenue bonds, project bonds, and securitized bonds—and notes that the majority are 'use of proceeds' bonds backed by the issuer's entire balance sheet. The market grew significantly from $11bn in 2013 to $36.6bn by the end of 2014, with major issuers including the European Investment Bank and the World Bank. While the 'Green Bond Principles' provide best practice guidelines, the document highlights a lack of universal definitions for 'green' projects, a gap the Climate Bonds Initiative (CBI) is addressing with sector-specific standards. For investors, green bonds offer a way to meet ESG objectives without necessarily taking on additional project-specific risk, though the secondary market remains thin due to a 'buy-and-hold' investor base.

This guide outlines a comprehensive set of questions for institutional investors to use during due diligence of private equity managers. It focuses on five key areas: alignment with science-based climate targets (including phasing out fossil fuels by 2030), disclosure of fossil fuel exposure and emissions, the existence of portfolio-wide energy transition plans, the integration of climate and environmental justice, and transparency regarding political spending and climate lobbying.