Green Bonds

Sustainable Bond Guide Hopes to Boost Gender Equality

New rulebook comes amid warnings that the pandemic is likely to cut economic progress made over recent decades for women.

Several organisations have come together to promote use of sustainable bonds as an effective vehicle to bring about gender equality through opening new finance routes for empowering women and ending discrimination.

UN Women, the International Finance Corporation (IFC) and the International Capital Market Association (ICMA) launched the guide, entitled ‘Bonds to Bridge the Gender Gap: A Practitioner’s Guide to Using Sustainable Debt for Gender Equality’, designed to provide guidance on how to use sustainable bonds to access financing for projects and strategies that advance gender equality objectives. The guide hopes to boost the market, which is still largely underfunded, through gender equality-focused bonds.

“The rise in sustainable finance does offer paths to direct capital at scale to reducing the gender gap – that is the spirit of this guide, which is aimed at market practitioners,” said Denise Odaro, Head of Investor Relations at IFC, speaking at the webinar launching the guide. “As of October 2021, over US$2 trillion of sustainable debt has now been issued since the birth of this market, but only a small fraction of this has been earmarked for gender equality,” she added.

Sustainable bonds include stipulations for proceeds to be put into projects with clear sustainability-related objectives, backed by key performance indicators (KPIs), reporting requirements and targets. These can include clauses that penalise or set out extra charges if the proceeds are not used for set goals.

The guide specifies that debt instruments such as social, sustainability, and sustainability-linked bonds and loans provide financing opportunities for market participants, which would otherwise not be available. “These products can shift the relationship between issuers and investors that centres on the exchange of financial data toward one that also focuses on accelerating organisational change to advance social impact,” it says. “In the bond market, particularly, the demand for gender-related sustainable bonds remains high among investors— higher than the current supply.”

It also provides both the public and private sector information on how to use sustainable bonds to finance projects. It offers examples of gender-related use-of-proceeds, as well as what KPIs are needed in the case of sustainability-linked bonds.

To inform the private sector on use-of-proceeds, the report includes recommendations around leadership, supply chain, community, and employee representation. For the public sector, it includes socio-economic advancement and empowerment sections, as well as stipulations on redistribution and unpaid care KPIs and anti-violence measures.

“We believe that bond markets have untapped potential to fund the advances in gender equality that are so essential for sustainable economic development,” said Bryan Pascoe, ICMA CEO.  “This guide, based around the use of the established social bond principles and sustainability-linked bond principles, is an important step forward in encouraging issuers and investors to integrate gender into sustainable bond issuances and investment.”

The guide is designed to lead the way for the market, which has struggled to grow in recent years despite green bonds’ marked rise. In its statement, the authors note that gender inequalities persist around the world, with COVID-19 highlighting how the crisis has disproportionally affected women.

During a webinar launching the report, Makhtar Diop, Managing Director of the IFC, said the pandemic threatened to undo decades of progress towards gender equality due to the way it has upturned economies around the globe.

“Similar to the way in which the introduction of green bond standards and guidelines facilitated the growth of the green bond market and the development of a separate asset class, these guidelines on gender will provide the support needed to capital markets to increase the volume of financing for gender equality,” Pascoe added.

With less than a decade remaining to achieve the 2030 Agenda for Sustainable Development, there must be an acceleration in the development of financial solutions driving gender equality, said Diop.

“While investors’ appetite for products that address social issues are growing rapidly, sustainable finance markets have struggled to keep up with their demand,” he added.

The launch comes after a US-focused study from Russell Investments and Cerulli Associates showed that over one-third – 34% – of asset owners now viewed D&I as the most important criteria used to evaluate managers on ESG issues.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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