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The International Capital Markets Association recently issued an updated version of its “Green Bond Principles” document, which outlines best practices for issuers of green bonds. This Sidley memo reviews the most recent update. Here’s the intro:

In June 2021, the International Capital Market Association (ICMA) published an updated version of its Green Bond Principles (GBPs). First published in 2014, the GBPs are a voluntary framework for issuers to follow when issuing green bonds, aimed at promoting the role of debt capital markets in financing the transition to environmental sustainability by promoting transparency and disclosure, thereby reducing the risk of “green washing.”

The recent updates to the GBPs do not revolutionize the key concepts underlying the GBPs; rather they reflect recent market and regulatory developments. In the GBPs, ICMA strikes a balance between streamlining market practice in a set of defined guidelines and framing developing practice into an industry-wide standard for green bond disclosure.

The four key GBPs – (i) use of proceeds, (ii) process for project evaluation and selection, (iii) management of proceeds, and (iv) reporting – remain substantively unchanged, but they have been expanded by additional, detailed guidance. Transparency has always been the underlining objective of the GBPs, and this has been enhanced with the introduction of two new recommendations: Green Bond Frameworks and the use of an external reviewer to assess the alignment of green bonds with the GBPs.

On a related note, check out this Moody’s publication on the burgeoning growth in the broader sustainable finance category during the first quarter of 2021. Moody’s says that sustainable financings set a new quarterly record of $231 billion during 2021’s first quarter, more than triple the amount issued during the first quarter of last year & 19% higher than the $195 billion issued during the fourth quarter of 2020.

– John Jenkins