Three new publications provide issuers with key guidance on Green, Social, and Sustainability Bonds.

By Paul A. Davies, Michael D. Green, and Aaron E. Franklin

The Executive Committee for the Green Bond Principles recently published three documents providing key guidance complementing the Green Bond Principles (GBPs), the Social Bond Principles (SBPs), and the Sustainability Bond Guidelines (SBGs). The guidance documents include the Green Project Mapping document, the Guidance Handbook, and the Impact Reporting Handbook.

The 2018 revisions of the GBPs, SBPs, and SBGs remain unchanged and applicable. However, the new publications offer complementary guidance, consolidating existing information and incorporating new information based on market feedback and information requests from market participants.

Green, Social, and Sustainability Bonds

Green Bonds enable capital-raising and investment for new and existing projects with environmental benefits. The GBPs are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for the issuance of a Green Bond.

Social Bonds are use-of-proceeds bonds that raise funds for new and existing projects with positive social outcomes. The SBPs promote integrity in the Social Bond market through guidelines that recommend transparency, disclosure, and reporting.

Sustainability Bonds enable the proceeds to be exclusively applied to finance or refinance a combination of both Green and Social Projects. The SBGs confirm the relevance of the GBPs and SBPs in the context of Sustainability Bonds, and facilitate the application of the GBPs and SBPs guidance on transparency and disclosure.

Green Project Mapping

The Green Project Mapping document addresses requests for greater clarity on green project eligibility and presents two guidance tables.

The first table maps project categories of the GBPs against the five environmental objectives referenced in the GBPs, based on the most commonly observed contributions:

  • Climate change mitigation
  • Climate change adaptation
  • Biodiversity
  • Conservation
  • Pollution prevention

The process for project evaluation and selection under the GBPs requires a Green Bond issuer to communicate to investors a green project’s environmental sustainability. The first table allows easy confirmation of indicative primary, secondary, or tertiary impacts that may affect the related environmental objective, enabling investors to evaluate the project’s potential benefits. However, the assessment of the project will be based on the issuer’s judgment.

The second table presents a high-level comparison of global classification standards including the China Green Bond Catalogue, the Climate Bonds Initiative, and the Multilateral Development Banks and International Development Finance Club (MDB-IDFC). The recently released EU Taxonomy is included — in name only — for completeness. Please see this prior Latham blog post for more information on the EU Taxonomy.

Guidance Handbook

The Executive Committee authorized the Guidance Handbook with the objective of enhancing the accessibility and user-friendliness of the information contained in the GBPs, SBPs, and SBGs.

  • Section 1: Fundamentals
    • Outlines basic green, social, and sustainability bond concepts and principles, such as: definitions; who can be an issuer; advantages to issuing green bonds; external review; and differences between various types of green, climate, environmental, social, sustainability, and ESG bonds.
  • Section 2: Governance and Membership
    • Explores how companies may join the GBPs and SBPs as Members or Observers, along with voluntary contribution expectations. Detail on Executive Committee elections, and regulation, is also provided.
  • Section 3: Core Components of the GBPs/SBPs
    • Explores use-of-proceeds, issuer transparency, project eligibility, management of proceeds, and reporting obligations.
  • Section 4: Market and Technical Issues
    • Discusses statistical research of bond performance, fungibility considerations, and the possible emergence of green bonds as a distinct asset class.
  • Section 5: Other Market and Official Sector Initiatives
    • Explores the GBPs’ alignment with international climate change-related initiatives, such as the Paris Agreement and the UN Sustainable Development Goals.

Impact Reporting Handbook

The comprehensive Impact Reporting Handbook[i] (IR Handbook) is divided into five sections. Sections 1, 2, and 5 provide an introduction, background history to the IR Handbook, and reporting templates respectively.

Section 3 — titled Core Principles and Recommendations for Reporting — provides general reporting recommendations, information on differences of approach in allocation of proceeds (allocation to individual projects versus allocation to a portfolio of projects), and recommended impact report content.

Section 3 advises issuers to, at the very least, report against a limited number of sector-specific core indicators. If no single commonly used standard of calculation of indicators exists, issuers are encouraged to follow their own methodologies. A consistent approach in unit reporting is advised — for example converting tons of coal equivalent (TCE) to megawatt hours (MWh) with appropriate disclosure of conversion approach. Above all, transparency is encouraged.

Section 4 — titled Sector Specific Guidance and Reporting Metrics — provides reporting metrics and core indicators for several types of projects, including:

  • Renewable Energy Projects
  • Energy Efficiency Projects
  • Sustainable Water and Wastewater Management Projects
  • Waste Management and Resource Efficiency Projects
  • Clean Transportation Projects (g., electric, hybrid, non-motorized)
  • Green Building Projects

For example, the IR Handbook lists Renewable Energy Project Core Indicators as follows:

  1. Annual greenhouse gas (GHG) emissions reduced or avoided in tons of CO₂ equivalent
  2. Annual renewable energy generation in MWh or gigawatt hours (GWh) for electricity, and gigajoules (GJ) or terajoules (TJ) for other energy sources
  3. Capacity of renewable energy plant(s) constructed or rehabilitated in MW

The IR Handbook also lists Energy Efficiency Project Core Indicators as follows:

  1. Annual energy savings in MWh or GWh for electricity, and GJ or TJ for other energy savings
  2. Annual GHG emissions reduced or avoided in tons of CO₂ equivalent


Based on industry feedback, the Executive Committee determined that that further clarity with respect to the nature, use, and reporting of Green, Social, and Sustainability Bonds would facilitate market development. The Green Project Mapping document and the Guidance and IR Handbooks provide a suite of easily accessible information complementary to the original information in the GBPs, SBPs and SBGs.

The new guidance should assist current and new issuers in understanding their place in the market, their reporting and transparency obligations, and the function of Green, Social, and Sustainability Bonds as green finance becomes more entrenched in the marketplace.

Latham & Watkins will continue to monitor developments in this area.

This post was prepared with the assistance of Martin Cassidy in the London office of Latham & Watkins.

[i] Officially titled “Handbook – Harmonized Framework for Impact Reporting.”