Guide to Nature-related Sustainable Bonds
The International Capital Market Association (ICMA) releases a guide to nature-related sustainable bonds, aiming to provide guidance for the issuance and evaluation of nature-related sustainable bonds.
The guide to nature-related sustainable bonds is based on the existing Green Bond Principles, Social Bond Principles, Sustainable Development Bond Principles, and Sustainable Development Linked Bond Principles of the International Capital Market Association.
Related Post: International Capital Market Association Releases Green Enabling Projects Guidance
Nature and Nature-related Bond Financing
Nature includes biodiversity, ecosystems, and ecosystem services. The 2022 Global Biodiversity Framework (GBF) aims to curb and reverse natural loss by 2030. The World Economic Forum (WEF) believes that to achieve this goal, the world needs $700 billion in financing annually and can create $10.1 trillion in business opportunities annually, adding 395 million new jobs by 2030.
Natural finance is a key area of green finance, with sustainable bonds focused on nature conservation and restoration, reducing the loss of biodiversity, ecosystems, and ecosystem services, supporting nature related solutions, and providing allocation opportunities for investors with nature as their investment theme. Nature-related sustainable bonds may be use of proceeds bonds or sustainable linked bonds with natural indicators as key performance indicators.
Introduction to Nature-related Sustainable Bonds
International Capital Market Association believes that nature-related sustainable bonds can help:
- Restore and protect biodiversity, ecosystems, and ecosystem services.
- Transform economic activities to reduce the driving factors of biodiversity, ecosystem, and ecosystem service loss, such as changes in land and ocean use, overexploitation of natural resources, pollution, species invasion, and climate change.
- Support natural related solutions.
Nature-related sustainable bonds can cover multiple green finance themes, and given the interconnectedness of climate and nature, the ICMA blue bond guide focused on ocean financing can also serve as a reference. Issuers and investors should also be aware that not all climate-related projects are related to nature, and not all nature-related sustainable bonds can support climate change mitigation or adaptation.
The International Capital Market Association recommends that nature-related sustainable bonds disclose at least one impact indicator to demonstrate their positive impact on nature. This indicator can be at the environmental or social level. If the bond related indicators cannot be improved, the issuer can disclose the difference between its indicators and the industry average level. Due to the high dependence of natural theme indicators on geographic information, issuers need to disclose the geographic environment and stakeholders of the project.
Investors can analyze the impacts, dependencies, challenges, and opportunities related to nature based on the information provided by sustainable bonds. Investors can refer to the Taskforce on Nature-related Financial Disclosures (TNFD) framework and the Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services biodiversity substantive matrix to evaluate bonds.
Reference:
Sustainable Bonds for Nature: A Practitioner’s Guide
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