ICMA releases new resources on Sustainability-Linked Bonds, Green Bonds and Sustainability-Linked Loans financing Bonds

On 25 June 2024, the International Capital Market Association (ICMA) released new materials and guidance to support the Green, Social, Sustainability and Sustainability-Linked Bond Principles (the Principles).

Latest Publications and resources

New materials and guidance released today include:

• Guidance for Green Enabling Projects: This publication is directed at projects which are not themselves explicitly green but which enable a Green Project’s implementation or development (so called ‘Green Enabling Projects’) and includes guidance around induced and avoided emissions as well as management of environmental and social risks.  

In order to qualify as a Green Enabling Project, the project must meet certain criteria (including being a necessary component of an enabled Green Project’s value chain and not leading to carbon lock-in) and comply with transparency requirements on end-use in order to demonstrate the project’s environmental benefits. 

Additional guidance is also included relating to the interaction with the Green Bond Principles and provides a non-exhaustive list of indicative sectors for which Green Enabling Projects could apply.

• Guidelines for Sustainability-Linked Loans financing Bonds (SLLBs): Together with the Loan Market Association (LMA), ICMA has introduced guidelines for SLLBs to enhance the transparency and credibility of this developing market. SLLBs are bonds where the proceeds are used to finance or re-finance a portfolio of new or existing eligible Sustainability-Linked Loans (SLLs) aligned with the LMA’s Sustainability-Linked Loan Principles (SLLP). The SLLB guidelines introduce four core components for alignment (inspired by the core components of the Green Bond Principles and Social Bond Principles):

1. use of proceeds (providing two possible approaches around transparency on the basis for selecting eligible SLLs);
2. process for SLL evaluation and selection (including the process and criteria for disqualifying or requalifying SLLs initially included in the portfolio);
3. management of proceeds; and 
4. reporting.

The SLLBs also recommend issuers explain the alignment of their SLLB against these four components in an SLLB Framework (which should be made available to potential investors) and ensure that any external reviews are publicly available on the issuer’s website or other appropriate channels.

Further guidance

Further guidance has also been published on specific aspects of the Principles, including:

• A 2024 update of the Sustainability-Linked Bond Principles, which includes clarifications around KPI selection (KPIs should be consistent with the issuer’s overall sustainability strategy whilst also reflecting the most material strategic dimensions for the issuer);  encourages issuers to refer to the KPI Registry in the selection of KPIs (and noting guidance within around core and secondary KPIs); new glossary definitions; and updates to the checklist at Appendix II to clarify expected disclosures. Also published today was a new SLB disclosure data checklist aiming to provide non-prescriptive guidance to issuers who wish to align their disclosure around comparable language and data points.
• Updates to the SLB KPIs Registry to include additional KPIs relating to environmental themes (such as biodiversity, the circular economy and water) alongside additional KPIs for sovereign issuers.
• A 2024 edition of the Guidance Handbook which includes (i) two new questions relating to the newly published materials (Q7.5 relating to the SLLB guidelines and Q1.19 relating to the Green Enabling Projects Guidance); (ii) updates to Q4.1.3 to include a reference to the new SLB disclosure data checklist and (iv) updates to Q4.3.4 to also recommend disclosure of intermediate targets in addition to any long-term trajectory even if not necessarily disclosed as an SPT per se.
• Finally, a new Annex has been added to the Handbook – Harmonised Framework for Impact Reporting highlighting the processes for identifying environmental and social risks associated with eligible project categories for green bonds. 

ICMA are expected to release further publications to support the market in the coming months, including on the alignment of the Social Bonds Impact Reporting Handbook with the equivalent Green Bond framework and additional materials to support the SLB market.