ICMA's new guidelines on Green, Social and Sustainability Bonds

On 25 June 2024, the International Capital Market Association (ICMA) introduced new criteria and further guidelines to support the Green, Social, Sustainability, and Sustainability-Linked Bond Principles (the “Principles”).

In particular, the new materials and guidance include:

• amended guidelines applicable to the so called “Green Enabling Projects”: the document targets those projects that, while not explicitly green themselves, facilitate the implementation or development of a Green Project (referred to as “Green Enabling Projects”).

From a general perspective, following the amendments, to be considered as eligible, a Green Enabling Project must meet specific criteria (including being a crucial part of a Green Project's value chain without causing carbon lock-in) and adhere to certain transparency requirements in order to be effectively considered as linked with environmental benefits;

• amended guidelines for Sustainability-Linked Loans financing Bonds (SLLBs): these integrations have been developed in collaboration with the Loan Market Association (LMA) and aim to improve the transparency and credibility of the SLLB market.

The guidelines outline four core alignment elements: use of proceeds, process for Sustainability-Linked Loans evaluation and selection, management of proceeds, and reporting.

Issuers are also encouraged to illustrate their SLLB alignment in an SLLB Framework, which should be accessible to potential investors, and ensure any external reviews are publicly available.

Additional updates and guidance on the Principles include:

• 2024 Update of the Sustainability-Linked Bond Principles: this amendment clarifies KPI selection, ensuring KPIs align with the issuer’s sustainability strategy. Issuers are encouraged to use the KPI Registry for selecting KPIs, with guidance on core and secondary KPIs. The update also includes new glossary definitions and checklist amendments to clarify expected disclosures. A new SLB disclosure data checklist provides non-prescriptive guidance for comparable language and data points;

• updates to the SLB KPIs Registry: in details, this amendment adds KPIs related to environmental matters like biodiversity, the circular economy, water management, alongside additional KPIs for sovereign issuers; and

• 2024 Edition of the Guidance Handbook: the document now incorporates two new questions about the newly published materials, updates to reference the new SLB disclosure data checklist, and recommendations for disclosing intermediate targets along with long-term goals, even if not stated as an SPT.

Additionally, ICMA has also published a new Annex in the Handbook – Harmonised Framework for Impact Reporting: Highlights processes for identifying environmental and social risks associated with eligible project categories for green bonds.