On Thursday, the International Capital Markets Association (ICMA) published an update to its Green Bond Principles to reflect the standard market practice of green bond issuances – the first time that the Green Bond Principles have been updated since 2018.
Notable updates to the Green Bond Principles include the following recommendations:
- For issuances to be issued pursuant to a Bond Framework;
- For an External Review of the Bond Framework’s compliance with market best-practices or taxonomies pre-issuance and of the allocation of the proceeds of the green bond to the eligible green projects post-issuance; and
- Heightened transparency and disclosure of an issuer’s sustainability strategies and commitments to identify and manage perceived and known environmental risks, and the degree of alignment of projects with official or market-based taxonomies.
Similar updates were also published to ICMA’s Social Bond Principles and Sustainability Bond Principles, along with other additional user guidance for the existing sustainable finance bond documentation published by ICMA including the following:
- Examples of KPIs for Sustainability-Linked Bonds;
- A pre-issuance checklist for social bonds;
- Guidelines for impact reporting databases and impact reporting metrics;
- An update of the Green Project Mapping; and
- An update to the GBP Guidance Handbook.
This strengthening of these sustainable finance bond standards to reflect best practices and, in particular, the recommendations for an external review and more disclosure from issuers will further contribute to the standardisation of these products in the market.