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2023 Sustainability Linked Bond Principles Updates

Executive Summary

On June 26th, 2023, the International Capital Markets Association (ICMA) issued an updated version of the Sustainability-Linked Bond Principles (SLBP), marking the first revision since its launch in June 2020 (available here). The revisions, accompanied by an updated Key Performance Indicator Registry and a Q&A related to Sustainability-Linked Bonds (SLBs) released in September, aim to enhance guidance on structuring features, disclosure, and reporting. Natixis CIB is the Co-Chair of the Sustainability Linked Bond Working Group within ICMA.

The Sustainability-Linked Bond Principles provide guidelines that recommend structuring features, disclosure, and reporting. The 2023 version of the SLBP includes minor updates in order to accommodate the five core components of the SLBP for all types of issuers, particularly sovereigns and sub-sovereigns.


The illustrative KPIs Registry is an excel spreadsheet that includes high-level recommendations, as well as illustrative examples for the selection of Key Performance Indicators (KPIs) for Sustainability-Linked Bonds (SLBs). In June 2023, the SLB working group enriched the Registry including additional KPIs focusing on two main objectives:

  • social related KPIs focusing on three topics: fair transition, access & affordability and social considerations in value chain, in the continuity with the previous version detailing the core vs. secondary nature, as well as some global and sector benchmarks and initiatives and the targeted social objective.
  • sovereign related KPIs, provided with no indication whether KPIs are secondary or core as their nature is highly variable from a sovereign to another depending on its core sustainability issues and challenges.

The updated SLB Q&A guide, released on September 1st, adds precision and additional guidance to interpreting and implementing SLBP in practical transaction applications and amid market developments. As main expectations from the market, several new questions have been addressed regarding:


  • the acknowledged KPI and/or SPT recalculation events and amendments prior to the maturity of an SLB, with necessary conditions, including the need to have an external party verifying that the new KPIs/SPTs reflect at least the same level of materiality and ambition.
  • the conditions under which it would be considered necessary for an issuer to carry out a bondholder consent solicitation process, inviting issuers to clearly define careful recalculation policy in the bond terms and conditions to reduce needs to seek bondholder consent.
  • the management of outstanding SLBs in case of publication of a more ambitious strategy or a new framework and the integration of the actual progress made in potential new SLB issuance.
  • the strong recommendation of setting science-based targets, at least aligned with existing region and/or sector decarbonisation pathways but clarifying the fact that SBTi [or SBTN or comparable science-based schemes] approved targets are not needed to issue an SLB and that other sources than science-based pathways might be of better use when it comes to social KPIs.

The Q&A also clarifies the need to respect the SLBP fundamental principles for KPI selection, i.e. relevant, core and material, when issuers select for a given transaction only some but not all of the KPIs and SPTs set out in their framework, inviting SPO providers to specify the necessary combination(s) of KPIs and market participant to refer to the Illustrative KPIs Registry, with regards to ‘core’ and ‘secondary’ KPIs at sector level.


The Q&A confirms the inclusion of a KPI related to "green" capital expenditure as a 'means-oriented' KPI, offering a relevant option when a Scope 3 GHG emissions KPI/SPT is not feasible, and the possibility to rely on M&A (acquisitions or divestments / phase out) to achieve SPT under conditions or (gradual) phase in/phase out.


Some factors are provided to design or evaluate the meaningfulness of any adjustment to the bond financial characteristics, such as the absolute value of the penalty compared with corporate earnings (EBITDA) or volume of capex/opex, the proportion of the penalty compared with the spread, the non-financial incentives like reputational impacts if SPTs are missed.


Reporting expectations have been specified. The SPT should be deemed not achieved and the respective predefined step-up should apply in case of lack of reporting at the observation date and/or breach with reporting commitments.


Natixis CIB will continue to co-chair the ICMA SLB working group in 2024, by providing further guidance and tools, in order to actively participate in the SLB market development while protecting its integrity.