ICMA Updates Green & Social Bond Principles

    Stockholm (NordSIP) – The International Capital Markets Association (ICMA) published the 2021 edition of its Green and Social Bond Principles (GBP), a voluntary framework outlining bestpractices when issuing social and green bonds to guide capital markets in supporting environmental and social sustainability. This is the first update to the GBP since 2018. The 2021 editions of the Social Bond Principles and Sustainability Bond Guidelines have been similarly revised.

    “The Principles are the foundation for the global sustainable bond market,” Martin Scheck, Chief Executive, ICMA added. “The 2021 edition will continue to support its growth and innovation as we tackle the pressing issues of sustainability and climate transition, while also giving the issuers who are committed to financing change, further guidance on transparency and reporting as the market evolves.”

    According to the ICMA, the Green and Social Bond Principles are the global standard for a US$1.6 trillion market. In 2020, these standards were referenced by an estimated 97% of sustainable bonds issued globally.

    “The updates to the Green and Social Bond Principles ensure that the frameworks keep in step with market developments as issuance grows,” Denise Odaro, Chair of the Principles, Head of Investor Relations, IFC said. “The recent pandemic and ongoing climate crisis have brought sustainability needs more to the core of capital markets and the goal remains to provide issuers and investors with a compass for best practices in using sustainable bonds to access much needed capital to meet the transition to a just and low carbon economy.”

    The 2021 updated edition features: includes two key recommendations on the Bond Framework and External Reviews designed to increase transparency alongside the four core components (Use of Proceeds, Process for Project Evaluation and Selection, Management of Proceeds, and Reporting). The report also features a recommendation of heightened transparency for issuer-level sustainability strategies and commitments as well as a call to supply relevant information about how aligned the projects are with official or market-based taxonomies. The updated principles also urge issuer to be transparent about their processes to identify and manage perceived and known social and/or environmental risks. Finally, the report also provides links and references to the complementary guidance of the Climate Transition Finance Handbook, the Harmonised Framework for Impact Reporting, the Guidelines for External Reviews, which are supplemented by the Guidance Handbook.

    “Many investors view the sustainable bond markets through an impact lens, and will certainly welcome this year’s updates: Impact reporting is now strongly recommended for all use-of-proceeds bonds. The impact reporting handbook has been expanded with guidance on the circular economy and eco-efficient products category, and there is new guidance for database providers seeking to support market participants with the collection and aggregation of impact data,” Johanna Köb, Head of Responsible Investment, Zurich Insurance and Vice-Chair of the Executive Committee of the GBP SBP, concluded.

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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