An influential market body has announced guidelines aiming to define a bond instrument designed for issuers wishing to finance or re-finance a portfolio of sustainability-linked loans aligned with industry principles.
The guidelines for Sustainability-Linked Loan financing Bonds (SLLBs) were revealed by the body behind the Green Bond Principles, overseen by the International Capital Market Association (ICMA).
They were developed jointly with the Loan Market Association, which has developed best practice principles for sustainability-linked loans.
The ICMA body also released guidance for “green enabling projects”, and further guidance:
- an update of the Sustainability-Linked Bond Principles with clarifications to support KPI selection and a new SLB disclosure data checklist;
- an expansion of the SLB KPIs Registry related to environmental themes (biodiversity, circular economy/raw materials and water) as well as additional KPIs for sovereign issuers;
- a new annex of the Impact Reporting Handbook covering potential environmental and/or social risks associated with eligible project categories for green bonds.
Nicholas Pfaff, ICMA deputy chief executive officer and head of sustainable finance, said the guidance for financing green enabling projects took into account the underlying sustainability challenges of their supply chains, and was “ground-breaking”.
“With the publication of the new Sustainability-Linked Loan financing Bonds, we are otherwise creating both a new financing opportunity in the debt capital markets while also aiming to support the integrity of sustainability-linked loans,” he added.
Gemma Lawrence-Pardew, head of sustainability at LMA, said SLLBs would enhance the robustness of the sustainability-linked loan market and offer issuers a new way to finance sustainable projects.
The update of the principles for sustainability-linked bonds comes at a time when the SLB market has faced criticism, with a recent Climate Bonds Initiative report revealing many SLBs have been weak and require improvement.
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