A UK government-backed report has called for green and sustainability-linked bonds (SLB) to integrate gender considerations.
Green bonds
In a new ‘how-to guide’, the UK-supported think-tank Gender Smart urged green bond issuers to include use of proceeds (UoP) targets that fulfil minimum gender considerations before proceeding with green projects.
And it said SLBs should have a greater focus on gender-related targets.
Key recommendations for UoP targets include:
- gender indicators in the eligibility criteria, such as requiring all projects to have a Gender Action Plan and commitment to measurement/reporting;
- or, to bring gender into the exclusionary criteria. This means excluding projects that fail to fulfil minimum gender considerations, the report said.
The report added that issuers with more ambitious objectives will go beyond the “do no harm concept” and impose stricter exclusionary criteria.
In collaboration with consultancy EY and think-tanks IMC Worldwide and the International Institute for Sustainable Development (IISD), Gender Smart recommended the gender components of green bond frameworks should “be in the form of a general, high-level requirement on gender integration.”
The table below outlines the report’s distinctions between issuing a sustainable bond and a green bond with gender considerations.
| Characteristics | Sustainability bond | Green bond with gender considerations |
|---|---|---|
| Key financing criteria – Use of proceeds | Green and social project categories | Green project categories that meet specific gender related eligibility and/or exclusionary criteria |
| Guiding principles | ICMA green bond principles (GBP) and social bond principles (SBP) | ICMA green bond principles (GBP) and other relevant guidelines and recommendations on gender equality |
| Eligibility criteria | It can vary depending on the objectives and priorities of the issuer. | It includes specific requirements on gender that all projects need to meet to be eligible for the proceeds of the bond. |
| Exclusionary criteria | It can vary depending on the objectives and priorities of the issuer. | It includes specific requirements on gender that all projects need to meet to be eligible for the proceeds of the bond. |
| Examples | Trianon Sustainability Bond, Islamic Development Bank Sustainability Bond, Government of Iceland Sustainability Bond | City of Minneapolis green bond |
Sustainability-linked bonds (SLBs)
The report also recommended SLB issuers include:
- Additional gender-related KPIs and sustainability performance targets (SPTs);
- To adapt the bond framework to support multi-KPI linked structures.
- Integrate key performance indicators (KPIs) that measure the impact of gender equality, by using one of four different approaches:
- Applying a scoring scale to KPIs;
- Financial restructuring of a bond if all KPIs are not met;
- Weighting KPIs; and,
- The self-declared “lenient” approach – selective fulfilment of KPIs.
In the first approach, the company must achieve a predetermined percentage of each of the KPIs to avoid a coupon step-up. In the third, different weights are assigned to KPIs when determining the size of the coupon step-up.
In the fourth “lenient” approach, an organisation does not need to achieve all KPIs in order to have a positive trigger event. This means that at least two out of the three KPIs must be achieved without “meaningfully underperforming on the third KPI”. The report commented: “There is no publicly available information on what constitutes ‘meaningful’ underperformance.”
Channels:Green Bonds
Companies:Gender Smart