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We are pleased to present the inaugural issue of this quarterly e-newsletter, designed to keep you up-to-date with highlights from the Green, Social and Sustainability bond markets, and developments from the Executive Committee of the Green Bond Principles (GBP), Social Bond Principles (SBP), and the Sustainability Bond Guidelines (SBG), referred to as the "Principles".

This first edition covers:

We welcome your feedback.

Regards,

The Secretariat for the Principles
greenbonds@icmagroup.org
socialbonds@icmagroup.org
sustainabilitybonds@icmagroup.org

 

Issuance News in Brief

  • Green Bond issuance in the first quarter of 2018 amounted to $29.6bn from 56 issuers in 13 currencies vs $27.9bn in Q1 of 2017.

  • Social bond issuance also saw an increase from its volume of $1bn in Q1 2017 to $2.3bn in Q1 2018 through 12 trades across 5 currencies.

  • Sustainability bond issuance increased from $3.5bn in Q1 2017 to $4.9bn in Q1 2018 from 10 trades in 3 currencies.*

The increased spate of sovereign green bond issuance has been welcomed by investors. As at end of Q1 2018, 6 sovereign issuers have now joined the green bond market. In January 2018, Indonesia placed the world's first green sovereign sukuk bond while Poland issued its second green bond and in February 2018, Belgium priced its inaugural green bond. In Hong Kong, the Government announced plans for a sovereign green bond issuance programme of up to HK$100 billion (US$12.7bn), as well as plans for a grant scheme to support green bond issuance. In March, the Lithuanian government announced plans to become the first among the Baltic states to issue green bonds.

Over 400 issuers have now issued green, social and sustainability bonds in over 30 currencies across 50 countries globally. The Principles remain the leading framework globally for issuance of green, social and sustainability bonds.

*Data from © Dealogic 2018

 

Market News

Launch of the Green Loan Principles

The Green Loan Principles (GLP) were launched on 21 March 2018 by the The Loan Market Association (LMA) and the Asia Pacific Loan Market Association (APLMA), with the support of ICMA. The GLP aim to create a high-level framework of market standards and guidelines for use across the wholesale green loan market. The GLP build on and refer to the Green Bond Principles. They are based on the same four core components (Use of Proceeds, Process for Project Evaluation and Selection, Management of Proceeds and Reporting) and recommendations for the use of external reviewers.
The publication of the GLP marks the first step towards establishing widely accepted principles in the green lending space.

The Green Bond Pledge

Officially launched at the Climate Bonds Initiative's annual summit in March held in London, the Green Bond Pledge is a joint initiative developed and designed by international climate finance and environmental groups including the Climate Bonds Initiative, Mission 2020, CDP, Ceres, Citizens Climate Lobby, California Governor's Office, California Treasurer's Office, Global Optimism, NRDC & The Climate Group. The Pledge is a declaration that all bonds that finance long-term infrastructure and capital projects need to address environmental impact and climate risk.

First Social Bond issuance by a Multinational Corporate

Danone successfully launched a €300 million bond to finance and refinance projects that include positive social impacts. This Social Bond is the first to be issued by a multinational corporate aligned with the Social Bond Principles. The bond was issued a few weeks after the integration of ESG (Environment, Social and Governance) criteria in the payable margin of Danone's €2bn syndicated loan.

Policy developments

There were important policy developments in the EU with key proposals including a European Union Green Bond Standard building on the GBP, as well as a Sustainability Taxonomy. These initiatives were articulated in the final report of the European Commission High Level Expert Group (HLEG) on sustainable finance. ICMA was an observer on the HLEG. The HLEG report makes a number of recommendations, including:

  • a classification system, or “taxonomy”, to provide market clarity on what is “sustainable”;

  • clarification of the duties of investors when it comes to achieving a more sustainable financial system;

  • an improvement in disclosure by financial institutions and companies on how sustainability is factored into their decision-making;

  • an EU-wide label for green investment funds;

  • making sustainability part of the mandates of the European Supervisory Authorities (ESAs);

  • a European standard for green bonds.

The Commission subsequently released on 8 March an Action Plan on sustainable finance that follows many of the HLEG’s recommendations and identifies 10 priorities:

1. Better integrating sustainability in ratings and market research

6. Establishing an EU classification system for sustainable activities

2. Clarifying institutional investors' and asset managers' duties

7. Creating Standards and labels for green financial products

3. Incorporating sustainability in prudential requirements

8. Fostering investment in sustainable projects

4. Strengthening sustainability disclosure and accounting rule-making

9. Incorporating sustainability when providing financial advice

5. Fostering sustainable corporate governance and attenuating short-termism in capital markets

10. Developing sustainability benchmarks

The Commission published a call for applications, with a deadline of 16 April, to a Technical Expert Group which will serve as a conduit on dialogue between the Commission and the market on both the GB standard and the Sustainability Taxonomy.

The Secretariat encourages members and observers to respond to the open public consultation on financing sustainable growth in particular the section on non-financial reporting: The fitness check of the EU framework on public reporting.

There were also important developments in Asia, notably in China and Hong Kong. Among these, the publication in China of a joint white paper by the Green Finance Committee of the China Society for Finance & Banking and the EIB, identifying differences between Chinese and European green classifications, with a view to working on a common language.

Global Policies on Sustainable Financial System

A recently published report by the United Nations Environment Programme ‘Making Waves: Aligning the Financial System with Sustainable Development’ states that the global number and range of policy measures to advance aspects of sustainable finance has increased. At the end of 2013, 139 subnational, national-level and international policy and regulatory measures were in place across 44 jurisdictions. Four years on, the number of measures has risen to 300 in 54 jurisdictions, with a substantial rise in system-level initiatives.

Social/Sustainability Bond Infrastructure

As a consequence of discussions with Bloomberg, the search functionality on the Bloomberg terminal for Social and Sustainability Bonds has now been enhanced with the creation of a tag function based the SBP and SBG. Refer to the new Guide on the Terminal under BPS > Audience Specific > ESG Analysis > Social and Sustainability Bonds Guide.

   

Highlights from the GBP Executive Committee

The Steering Committee, the Working Groups and the Secretariat have focused on the following priorities during Q1 2018:

Mapping the Sustainable Development Goals (SDGs) to the Principles: The objective is to create a document that links certain SDGs to the the eligible categories for use of proceeds of green and social bonds under the GBP/SBP.

Enhancing Information on External Review services: Extensive engagement has been undertaken with several external reviewers towards provision of a comprehensive mapping of the services offered by providers. There is also revision of the definitions of the types of external review as contained in the Principles documents.

Green Project Eligibility: A working document is in progress which may imply amendments to the Principles to bring more clarity to some of the eligible projects criteria.

Social Bonds Impact Reporting: An initiative to produce an impact reporting template for Social Bonds is underway. The objective being to guide issuers as to how best to present metrics reflecting impact of social bond financed projects.

Research: A new Working Group focused on research was launched this quarter. The first objective has been conducting a survey among the buy-side members and observers of the GBP/SBP on their approaches to Green, Social and Sustainable Bond investing and portfolio management.
 

News from the Secretariat

Executive Committee Elections

12 ExCom Member seats will be up for re-election in June 2018. The election timelines are as follows:

  • 16 April: Call for candidacy opens. Interested organisations must complete a candidacy form before 16 May.

  • 21 May until 8 June: Opening of the voting period. GBP members will be asked to vote by email ballot.

  • 14 June: announcement of the results at the AGM.

Green Bond Principles AGM & Conference

Plans are well advanced for the 2018 GBP/SBP AGM & Conference, which is being co-hosted by The Hong Kong Monetary Authority (HKMA). The GBP and SBP AGM and Conference has become one of the most high-profile gatherings for leaders in the green, social and sustainable bond markets and increasingly for other asset classes in sustainable finance. Holding the event outside Europe for the first time constitutes recognition of the rising importance of Asian markets and policy initiatives. Further details including a registration form are available here, or by contacting the Secretariat.


What's New in the Principles Resource Centre

  • The Suggested Impact Reporting Metrics for Waste Management and Resource-Efficiency Projects.

  • Recommended templates for issuers to inform the market on SBP and SBG alignment.

  • Guidance for Sovereign Green Bond Issuers:
    Drawing on lessons learned from Fiji’s recent experience, the IFC published on 20 March 2018 a document that outlines practical considerations sovereigns can take at each step of the process from preparation to issuance and post-issuance reporting. It is hoped that with this guide, more sovereigns will be able to issue their own green bonds.


Courses

  • New Dates: ICMA Training Course: Introduction to Green Bonds
    London, 15-16 May 2018
    This two-day course from ICMA gives a thorough and practically oriented introduction to the essentials of green bonds. While focusing on green bonds the workshop also looks at developments in the social and sustainable bond markets.


Events

 

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