Guidelines to maintain trust in the sustainable bonds markets
Acknowledging the efforts made by COVID-19 bond issuers, investors have broadly been welcoming these initiatives with open arms and flexibility. A few investors have gone further and proactively issued statements or guidelines to give issuers support in their efforts.
One such investor is APG, the Dutch pension fund, that recently published such a set of guidelines. In their guidance they note that “we recognize the urgency of the current situation and believe it is appropriate to expand the use-of proceeds (UOP) definition to be more inclusive of COVID-19 related expenditures. We also believe this should be balanced with maintaining the integrity of the market. Therefore, APG has outlined a set of high-level guidelines and identified examples of corporate activities across various sectors that may potentially qualify as eligible use of proceeds.”
While investors appreciate the increased need for flexibility in the current circumstances, their requirements are largely focused on maintained transparency, reporting and alignment with current market standards to the highest possible extent. As AXA IM notes in their statement, “we have developed an investment framework which expects transparency from issuers around how proceeds will be used to support their response to the pandemic. We also call for a commitment to outcome and impact measurement.”
Looking ahead – what to expect
The rise of the COVID-19 bond is certainly an impressive achievement when considering speed, market applicability and ensuring integrity. The fact that investors have recently chipped in on these discussions is a further positive sign for the future development of the sustainable finance market.
Although we should not expect investors to do the work for the issuers, it is certainly encouraging to see a sustainable finance market that appears to be more dynamic, vibrant and engaging than previously. Looking ahead we can hope, as we do expect, that this becomes a more permanent feature of the market.
*What are COVID-19 bonds, and why do they matter? Find out more in this related article. Note that we have previously referred to such bonds as “corona bonds.” In this article, we will refer to them specifically as “COVID-19” bonds.
About the authors:
Ebba Ramel is an analyst in Nordea’s Sustainable Bonds team.
Jacob Michaelsen is Head of Sustainable Finance Advisory at Nordea.