Sustainable Finance

Guidance of the Principles for the sustainable bond market and new governance

At the Annual Conference of the Principles held in Amsterdam on June 25^th , ICMA released 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 green projects. The Guidance for Green Enabling Projects addresses the eligibility of green enabling projects, encompassing both the induced and avoided emissions dimensions, as well as the management of related environmental and social risks.

ICMA also released in Amsterdam the Guidelines for Sustainability-Linked Loan financing Bonds (SLLBs) developed jointly with the Loan Market Association (LMA). These define a dedicated bond instrument designed for issuers wishing to finance or re-finance a portfolio of eligible sustainability-linked loans (SLLs). SLLBs may serve as an incentive to enhance the robustness of sustainability-linked loan structures in the market over the longer-term.

Otherwise, the new governance of the Principles approved in February was implemented during the year after extensive follow-up and outreach with members and observers of the Principles. As expected, the mandatory financial contribution aimed at for-profit organisations that are not members of ICMA has recentred the Principles community around a group 335 entities that are genuinely engaged.

Wider ICMA role in the sustainable debt markets

On February 14th, we published “Transition finance in the debt capital market”. The paper reviews the latest guidance and recommendations on transition finance from both the market and the official sector. It underlines the progress of international taxonomies to integrate transition, as well as the latest developments on sectoral pathways and industry roadmaps. The paper also elaborates further on transition plans and proposes an “integrated transition plan” structure building on ICMA’s Climate Transition Finance Handbook and the existing guidance of the ISSB, the ESRS and the UK TPT’s recommendations.

ICMA released on April 29^th in partnership with the Islamic Development Bank (IsDB) and LSEG (London Stock Exchange Group) Guidance for the issuance of green, social and sustainability sukuk (together “sustainable sukuk”).The guidance aims to provide issuers and other key market participants with practical information on how sukuk may be labelled as green, social or sustainability and aligned with the Principles through examples, case studies and best practices, with the aim of helping the development of the sustainable sukuk market.

We published on October 7th a paper entitled "The role of commercial paper in the sustainable finance market". With the market for sustainable CP potentially reaching EUR 300 billion, this paper provides important insights into its development and the best practices shaping its future. Also at the short end of the market, we released a summary report to reflect the feedback received in response to its 2024 Repo & Sustainability Market Survey, launched in February 2024. The survey deepens the understanding of existing market practices and identify issues for further reflection and future guidance

Regulatory engagement and dialogue

We helped to secure a critical clarification on the treatment of green and use-of-proceeds bonds under ESMA Guidelines on ESG-related fund names through the publication on December 13th of an ESMA Q&A. ESMA stated that investment restrictions related to Paris-aligned Benchmarks would not apply to ICMA Principles aligned green and use-of-proceeds bonds at the issuer level but at the level of the activities and projects financed.

In June 2024, we had published a letter on behalf of ICMA and its constituents, especially by the Asset Management & Investors Council and the Executive Committee of the Principles, where we expressed our members’ concerns on the potential application of Paris-aligned Benchmarks exclusions to green and use-of bond investments at the organisation level as it would cause significant disruption to sustainable funds and to the sustainable bond market. We followed this letter with an active and ultimately successful dialogue with ESMA and the National Competent Authorities.

Sustainable Finance work across Asia Pacific

On October 3rd, ICMA, sponsored by the SFC, published the Hong Kong Code of Conduct for ESG Ratings and Data Products Providers following a public consultation. Market participants were invited to provide feedback, specifically focusing on the Code’s applicability to the Hong Kong market, its clarity to ensure adherence, and the usefulness of the self-attestation document. Going forward, the HK Code will be hosted and maintained by ICMA. The Code represents a major step forward in fostering a globally consistent, interoperable, and proportionate framework for ESG ratings and data providers in Hong Kong, aligning closely with the recommendations outlined in the International Organization of Securities Commissions' (IOSCO) report on “Environmental, Social and Governance (ESG) Ratings and Data Products Providers”, ensuring its international relevance and applicability.