Reporting: ICMA warns proposed EU Green Bond rules would cause issuers to flee sustainable debt market
The International Capital Markets Association (“ICMA”) has warned that draft proposed amendments made to the European Green Bond (EuGB) Regulation could result in a loss of EU sustainable finance leadership, and disruption to the broader international market for sustainable bonds. The proposed green bond rules were designed to create a ‘gold standard’ for how companies and public authorities could raise green bonds, requiring extended factsheets into prospectuses, the inclusion of EU Taxonomy alignment plans, and mandatory external reviews for impact reports (among other requirements). ICMA warned the increased cost and potential liability for issuers could push them to turn to other markets and sources of finance; resulting in market contraction and loss of EU sustainable bond leadership. Additionally, the amendments could lead to fragmentation of the international green bond market with the EU following different rules from an international market. Read more.
Ratings: MSCI 2022 ESG trends to watch
The MSCI have highlighted the ESG trends impacting investors and companies in the coming year, categorising the trends into: climate-related issues derived from the path to achieving Net-Zero economy, the mainstreaming of ESG and emerging risks / opportunities from the development of sustainability strategies. Within the mainstreaming of ESG, MSCI note the potential of ESG ratings moving back to their intended purpose of improving the investment process – through a financial relevance lens – and as one part of the larger ESG ecosystem, given no single score can answer the growing range of ESG questions. This means there will be a growing requirement for specific lenses such as climate-change, diversity & inclusion, biodiversity, and materiality metrics for a more multi-faceted analysis. Moreover, as regulators and standard-setting bodies turn their gaze towards ESG ratings, one possible outcome could be the adoption of best practices that spell out the purpose of an ESG rating and its data sources and methodological choices, allowing ratings to evolve with an ever-sharper focus. Read more.