The Financial Markets Standards Board has published a
consultation on its transparency draft of its statement of good practice on the governance of sustainability-linked products. SLPs are products whose financial and/or structural characteristics can vary depending on whether the user (i.e., borrower or issuer of, or counterparty to, SLPs) achieves specific sustainability or ESG objectives. They can be used for general corporate purposes, which allows many users (e.g., borrowers, issuers, or counterparties to sustainability-linked products) to access the sustainable finance market in a more flexible way. The FMSB's statement is intended to codify good practice for the governance of SLPs and support consistent approaches across asset classes and jurisdictions. It is hoped this will enhance the quality and integrity of SLPs; boost market confidence; help mitigate greenwashing risk; and support the development of a deeper, more robust sustainability-linked product market. The statement of good practice is intended to apply to service providers (e.g., firms acting as sustainability-linked loan lenders, bookrunners, or lead arrangers on a sustainability-linked bond issuance or counterparties to a sustainability-linked derivative) or users of SLPs in wholesale financial markets and to support, and be read in conjunction with, existing asset-class specific guidance (notably ICMA, LMA, and ISDA principles). The deadline for comments is February 21, 2025.
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