July 2018
It is hard to believe that we have already reached the half way point for 2018. It has been an exciting second quarter in the Green, Social and Sustainability Bond markets. This edition of the newsletter covers:
As always, we welcome your feedback.
Regards,
The Secretariat for the Principles
greenbonds@icmagroup.org
socialbonds@icmagroup.org
sustainabilitybonds@icmagroup.org
Issuance News in Brief - Q2 2018
During the second quarter, issuance continued apace:
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In the green bonds space, over 80 issuers priced transactions in 16 currencies amounting to $41.2bn bringing the year to date volume to about $71bn up from $61bn in H1 2017. Cumulative issuance is now well beyond the symbolic $400bn mark.
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Social bond issuance came to $2.4bn in 6 currencies resulting in a H1 2018 total of $4.7 bn. $9.2bn of social bonds were issued in 2017, up 285% on 2016.
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Sustainability bonds issued $2.6bn in 3 currencies, taking the year to date volume to $7.5bn up from $5bn for H1 2017.
Source: Dealogic, CA-CIB, Citi, HSBC 2018
Updates from the Secretariat and the Executive Committee
The Principles Updated for 2018/2019
The updated versions of the Green Bond Principles, Social Bond Principles and the Sustainability Bond Guidelines were published at the GBP/SBP AGM & Conference in June. Some of the key changes to the Principles this year included:
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GBP: Distinction between suggested project types and five high level environmental objectives, namely climate change mitigation, climate change adaptation, natural resource conservation, biodiversity conservation, and pollution prevention and control;
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GBP: Reference to international and national initiatives to produce green taxonomies and classifications;
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SBP: Refinement of the definition of target populations that benefit from Social Projects;
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GBP and SBP: Revised definitions of external review services; Emphasis on timely reporting by issuers to investors in the case of material developments;
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SBG: confirmation that ESG or sustainability themed bonds are not aligned unless fully consistent with the four core components of the Principles.
Translations of the 2018 versions of the Principles into several languages are underway. The secretariat encourages volunteers who wish to assist with translating the principles to contact us.
Making Progress on Impact Reporting
During Q2, the Working Group on Impact Reporting for green bonds produced suggested metrics for reporting on Clean Transportation Projects in addition to metrics for Waste Management and Resource-Efficiency Projects published earlier in the year.
Similarly, the Social Bond Working Group developed a Harmonized Framework for Impact Reporting for Social Bonds including core principles and recommendations for issuers as they develop reporting processes. The document also provides a reporting template covering quantitative and qualitative information that issuers can adapt to their own circumstances.
Establishing Best Practices for External Reviews
Guidelines for External Reviews have been drafted by the Executive Committee and a dedicated Working Group in consultation with over 30 external reviewers. They are designed to contribute to the integrity of the Green, Social and Sustainability Bond market by providing further clarity on the role of external reviews. The Guidelines include (i) an updated typology of external reviews, (ii) ethical and professional standards and (iii) organisation and content.
In addition, an External Review Service Mapping Template and an accompanying User Guide have been made available to assist External Reviewers in providing market participants with clear information on the range of services offered as well as the context and content of the final external review report.
Mapping to the Sustainable Development Goals
Although not designed as a framework for investments, the Sustainable Development Goals (SDGs) launched in 2015 by the United Nations and adopted by 193 countries, have been proactively embraced by the investment community as a means of additional evaluation to track the Environmental, Social and Governance (ESG) impact of investments. In response to this trend, a High-Level Mapping of the Principles to the SDGs has been published. At this stage, 15 out of the 17 SDGs have been identified as relevant to Green, Social or Sustainability Bond eligible project categories. A spreadsheet supplement was released alongside the guide which contains a more detailed listing of the SDG targets mapped to the GBP and SBP.
Investors Feedback
The Research Working Group launched by the Exexcutive Committee in Q1 2018, has published the results of its inaugural survey undertaken in Q2 which targeted the buy-side to extract patterns of investor behaviour in the green, social and sustainability bonds market. The survey found that 68% of investors will not account for a bond from pure plays as green, social or sustainable, if not aligned with the Principles. Read the full Summary of Investor Survey published on the Resource Centre.
Executive Committee Elections
During the month of June, the annual election was held to renew one-half of the Executive Committee members, i.e. 12 seats, representing 4 organisations from each category (issuers, investors and underwriters). The Secretariat registered 109 ballots from almost 70% of the member and observer community, resulting in the following 2018/2019 Executive Committee composition:
| Investors |
|
Issuers |
|
Underwriters |
| |
| ACTIAM |
|
BANK OF CHINA |
|
BofA MERRILL LYNCH |
| AMUNDI AM |
|
EDF |
|
BNP PARIBAS |
| AXA IM |
|
EUROPEAN BANK OF RECONSTRUCTION AND DEVELOPMENT |
|
CREDIT AGRICOLE CIB |
| BLACKROCK |
|
EUROPEAN INVESTMENT BANK |
|
HSBC |
| KFW |
|
INTERNATIONAL FINANCE CORPORATION |
|
JP MORGAN |
| MIROVA |
|
KOMMUNALBANKEN NORWAY |
|
NATIXIS |
| TIAA-INVESTMENTS |
|
NORDIC INVESTMENT BANK |
|
RABOBANK |
| ZURICH INSURANCE GROUP |
|
WORLD BANK |
|
SKANDINAVISKA ENSKILDA BANKEN AB |
Members in blue were elected for a 2-year term ending at the AGM in 2020. Members in black will be up for re-election in 2019.
GBP/SBP Membership
The Secretariat welcomes the following new members of the Principles: Mitsubishi UFJ Morgan Stanley Securities Co, Bayerische Landesbank and Shinsei International Limited in the underwriter category; PIMCO Europe, SEB Investment management in the investor category; Asian Development Bank and Fannie Mae in the issuer category. New observers include Hong Kong Quality Assurance Agency, Mikro Kapital, Zhong Lun Law Firm, The Carbon Trustics Group, Hong Kong Investment Funds Association, Institute for Global Environmental Strategies, Japan Securities Dealers Association and Revalue.io.
As of 30 June 2018, the GBP/SBP now has 289 members and observers from over 35 countries.
Job Alert
The Secretariat is hiring! We are seeking an Associate to provide general support for the administration and management of the Principles. The position may be based either in London or Paris. Applications should be received by 31 July 2018.
View full job listing and application details.
European Action Plan on Sustainable Finance
The European Commission announced on 13 June the establishment of the Technical Working Group on Sustainable Finance (TEG) that will be making proposals in relation to the priorities of its Action Plan on sustainable finance. The main tasks of the group are indeed to assist the Commission in the development of:
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an EU taxonomy of environmentally sustainable economic activities
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an EU Green Bond Standard
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a category of "low carbon" indices for use by asset and portfolio managers as a benchmark for a low carbon investment strategy
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metrics allowing improving disclosure on climate-related information.
ICMA, represented by Nicholas Pfaff, has been nominated on the TEG following a highly selective process. ICMA will be particularly focused on representing the GBP/SBP and the market in discussions concerning the EU Green Bond Standard and the future taxonomy.
In addition to ICMA, the members of the group represent a wide variety of financial and economic actors as well as non-governmental agencies and academics. Several European and international institutions have also been invited as members or observers to the group including representatives from the European Supervisory Authorities, the European Central Bank, and multilateral development banks such as the European Investment Bank and the European Bank for Reconstruction and Development.
The TEG held its first meeting on July 5th in Brussels with ICMA’s active participation in the confidential discussions. The TEG’s mandate will run until 30 June 2019, with possible extension until the end of 2019.
