On December 9, 2020, the International Capital Market Association (ICMA) released its Climate Transition Finance Handbook (Handbook) and related Q&As to guide issuers in connection with the issuance of:
- “Use of proceeds” bonds, in line with the Green and Social Bond Principles or Sustainability Bond Guidelines; and
- General corporate purpose bonds, in line with the Sustainability-Linked Bond Principles.
The Handbook is based on the work of the Climate Transition Finance Working Group, made up of representatives from more than 80 entities participating in the capital markets and under the auspices of the Green and Social Bond Principles Executive Committee.
The Handbook’s recommendations have four key elements:
- Issuer’s climate transition strategy and governance;
- Business model environmental materiality;
- Climate transition strategy to be “science-based,” including targets and pathways; and
- Implementation transparency.
The Handbook specifies that relevant disclosures can be included in the issuer’s annual report, framework document or investor presentation as long as they are publicly accessible to investors. Concurrently, the recommended independent review, assurance and verifications can be included as either a Second Party Opinion or provided in the context of an issuer’s ESG reporting.