The Principles announce guidance for green enabling projects and guidelines for Sustainability-Linked Loan financing Bonds (SLLB) alongside other important updates
25 June 2024 The Green, Social, Sustainability and Sustainability-Linked Bond Principles (the “Principles”) announce guidance for green enabling projects and guidelines for Sustainability-Linked Loan financing Bonds (SLLB) alongside other important updates. The Principles are the global standard for the $5 trillion sustainable bond market that represents the largest source of market finance dedicated to sustainability and climate transition, available internationally to corporates and financial institutions, as well as supranationals, agencies and sovereigns.
Key publications and resources released today are:
- Guidance for green enabling projects: a great number of green enabling projects, vital to the value chain of green projects, are not themselves explicitly considered green but remain critical to these eligible green projects. This document seeks to provide guidance for such green enabling projects, encompassing both the induced and avoided emissions dimensions, as well as the management of related environmental and social risks. This includes identifying the role that green enabling projects play in catalysing and scaling the transition to a low-carbon economy in line with the goals of the Paris Agreement while recognising the complexities of value chains and challenges of multiple end-uses.
- Guidelines for Sustainability-Linked Loan financing Bonds (SLLBs): these guidelines, developed jointly with the Loan Market Association (LMA), define a dedicated bond instrument designed for issuers wishing to finance or re-finance a portfolio of eligible sustainability-linked loans (SLLs) aligned with the LMA’s Sustainability-Linked Loan Principles (SLLP). SLLBs may serve as an incentive to enhance the robustness of sustainability-linked loan structures in the market over the longer-term.
The Principles have also released today further guidance, specifically:
- 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.
The Principles also announced the renewal of half of the 24 members of its Executive Committee following an annual vote in line with its governance. The standards and guidance from the Principles are developed with the input of over 330 market participants and stakeholders, as well as the participation of many other organisations through technical working groups. The Principles are the de facto global standard referenced by 98% of sustainable bond issuance.
The 2024 Annual Conference of Principles is being held in hybrid format in Amsterdam on Tuesday 25 June. The full day conference agenda in Amsterdam combines keynote speeches and panel discussions with leading market figures and experts in sustainable finance. It features key updates on the 2024 guidance from the Principles, as well as the critical topics being debated in sustainable finance from a global perspective including transition finance, market integrity and regulation.
Isabelle Laurent, Deputy Treasurer, EBRD and Chair of the Principles, said: “Over the last 10 years since the establishment of the Green Bond Principles, its convening power and the body of work that has been produced under its auspices, including new innovative products and guidance, has served to support the role that capital markets can play in advancing the sustainability agenda and mobilising finance towards the goals of the Paris Agreement and the wider Sustainable Development Goals. We will drive hard to ensure that the next 10 years sees the work of the Principles continue with equal vigour and success”.
Nicholas Pfaff, Deputy Chief Executive and Head of Sustainable Finance, ICMA, said: “The Principles are releasing ground-breaking guidance for financing green enabling projects while taking into account the underlying sustainability challenges of their supply chains. 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.”
Agnes Gourc, Head of Sustainable Capital Markets, DCM Structuring & Solutions, BNP Paribas and Vice-Chair of the Principles, said: “The Principles have been leading the sustainable bond markets developments for the past 10 years. By incorporating market-wide insights and best practices, the Principles are providing this year again new avenues for the market to facilitate more financing to reach the global environmental and social goals. In particular, we hope the Guidance for Green Enabling Projects will help more issuers further up the value chain to access the green bond market.”
Alban de Fay, Head of Fixed Income SRI Processes, Senior Portfolio Manager, AMUNDI and Vice-Chair of the Principles, said “This year, the Green Bond Principles celebrate their 10th anniversary and represent the most mature sustainable bond market. However, they still require adjustments and adaptations. Overall, the releases of the Principles and the development of new guidelines illustrate the shared commitment of investors, issuers, and underwriters to bring even more credibility to these markets by encouraging greater standardization while taking into account new developments and innovations in this market. It truly showcases the beauty of a thriving ecosystem.”
Gemma Lawrence-Pardew, Head of Sustainability at the Loan Market Association, said: “The Loan Market Association is proud to have collaborated on the guidelines for Sustainability-Linked Loan financing Bonds. These innovative instruments will enhance the robustness of the sustainability-linked loan market and offer issuers a new way to finance sustainable projects. Our partnership with the Principles reflects our commitment to advancing sustainable finance and establishing clear frameworks to help drive the future development of this segment of the loan market.”
