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Freshfields Sustainability

| 3 minutes read

ESG bonds – recent ICMA and FCA publications

ESG-related publications dominated the news in the debt capital market last week. Of particular note are a suite of new and updated resources published by the International Capital Market Association (ICMA) to support issuers, intermediaries and investors in connection with international bonds dedicated to sustainability and climate transition; and the publication of Primary Market Bulletin 41 (PMB 41) by the UK Financial Conduct Authority (the FCA), dedicated to ESG-labelled bonds.

New and updated resources for ESG bonds published by the ICMA

The Green Bond Principles (GBP), Social Bond Principles (SBP), Sustainability Bond Guidelines (SBG) and Sustainability-Linked Bond Principles (SLBP) (together, the Principles) constitute the voluntary (yet widely adopted) global standards and guidelines for international ESG-labelled bonds. On 28 June 2022, the ICMA (in its capacity as Secretariat to the Principles) announced a suite of new and updated publications related to the Principles, including:

  • An updated version of the GBP, which includes (in Appendix 1) new definitions for green securitisation clarifying terminology and market practice, notably for collateral. Similar guidance is also available in an updated version of the SBP for social bond securitisation. A related Q&A has also been released (including sustainability criteria relating to collateral, no double counting principles, synthetic bonds and reporting requirements).
  • An updated registry of approximately 300 key performance indicators (KPIs) for Sustainability-Linked Bonds (SLBs), to help arrangers, issuers and investors in their design and assessment of SLBs. The KPIs are classified by sector/sub-sector, sustainability theme, potential KPIs and between core and secondary indicators. An accompanying Q&A for SLBs also addresses, among other issues, the materiality assessment of KPIs, whether SLBs may be issued with a call date the precedes the target observation date for the sustainability performance target (SPT), how issuers can evaluate the meaningfulness of any adjustment to the bond financial characteristics and whether an issuer can amend how it calculated a KPI or SPT prior to the maturity date of the SLB.
  • A new Climate Transition Finance Methodologies registry, with a list of tools to specifically help issuers, investors, or financial intermediaries validate their emission reduction trajectories/pathways as "science-based".
  • Updated Guidelines for External Reviews, to facilitate the assessment of alignment with the existing Climate Transition Finance Handbook.
  • New metrics for impact reporting for Green Projects relating to environmentally sustainable management of living natural resources and land use, and for Social Projects (including an enriched list of social indicators and impact confirmation on target population).
  • Updated high-level mapping of SBP or GBP project categories to the United Nations’ Sustainable Development Goals.
  • A new recommendations paper and proposed bond index mapping template for providers of Green, Social and Sustainability Bond index services.
  • A new Pre-issuance Checklist for Green Bonds/Green Bond Programmes and an updated Sustainable Bond/Bond Programme Information Template (including disclosure of the issuer’s sustainability strategy).

These publications demonstrate the ongoing evolution of products in the ESG bond market, from unsecured green bonds in the early days to secured green and social bonds encompassing sustainable securitisation. This evolution is set to continue, with industry taskforces set to focus more on the development of sustainable securitisation and on sustainable commercial paper. This innovation (and ultimately harmonisation) will benefit corporate issuers looking to use their ESG frameworks holistically across a spectrum of sustainable finance products.


The wide-spread market adoption of the Principles has been reflected in the FCA’s Primary Market Bulletin 41 and the related FCA Feedback Statement FS22/4: ESG integration in UK capital markets.

In PMB 41, the FCA encourages issuers of ESG-labelled use of proceeds bonds (such as green bonds, social bonds and sustainable bonds) to consider voluntarily applying or adopting relevant industry standards, and explicitly references the Principles and related guidelines (noting that other standards exist and that market standards may develop over time). The FCA also encourages issuers to consider verifiers’ and assurance providers’ expertise and professional standards, and to engage with second party opinion (SPO) providers and verifiers who adhere to appropriate standards of professional conduct, with explicit reference to the ICMA’s Guidelines for External Reviewers.

Of particular importance to issuers or potential issuers of ESG-labelled use of proceeds bonds is a reminder from the FCA in PMB 41 that, where ESG bond frameworks form part of a communication that relates to an offer or admission of securities, such ESG bond frameworks may constitute advertisements under the UK Prospectus Regulation. As such, these frameworks should be reviewed for compliance with the relevant advertisement rules and for consistency with the information contained in the prospectus (eg on use of proceeds disclosure); and furthermore, should not be inaccurate or misleading. In the related Feedback Statement, the FCA goes on to say that where advertisements fall short of their requirements, they will consider taking additional actions through their Market Oversight and Enforcement powers.


Regulators across the globe are looking at the possible regulation of ESG-labelled use of proceeds bonds to combat greenwashing and encourage transparency - the proposed EU Green Bond Standard is an example of this - but the voluntary yet widely adopted Principles and Guidelines will no doubt continue to play a pivotal role as market participants move forward with their transition to a net zero economy.

Please reach out to your usual Freshfields contact if you would like to discuss these developments in more detail.


esg bonds, esg, sustainability, climate transition, sustainable finance