ICMA to Release New Guidance on Sustainable Commercial Paper by End of 2024
Overview:
The International Capital Market Association (ICMA) is set to release new guidance on sustainable commercial paper (CP) by the end of 2024. This move aims to address the growing interest in sustainable finance instruments and provide a framework for users.
Summary:
The ICMA plans to release new guidance on sustainable CP by the end of 2024 to address the growing interest in sustainable finance. This guidance will provide a comprehensive framework covering eligibility criteria, use of proceeds, reporting, and verification to ensure transparency and standardization. The initiative is expected to significantly impact the sustainable finance market by encouraging more issuers and providing investors with greater confidence in their sustainable investments.
The Need for Guidance
The Increasing interest in sustainable commercial paper has highlighted the need for clear guidelines. Sustainable CP offers a short-term financing option that aligns with ESG criteria. However, the lack of standardized practices has posed challenges for market participants. The upcoming ICMA guidance aims to fill this gap by providing a comprehensive framework.
Key Components of the Guidance
The ICMA’s guidance will cover several critical aspects:
Eligibility Criteria: Defining what qualifies as sustainable commercial paper.
Use of Proceeds: Guidelines on how the funds raised should be allocated to ensure they meet sustainability goals.
Reporting and Transparency: Requirements for issuers to report on the use of proceeds and the impact of their projects.
Verification and Assurance: Recommendations for third-party verification to enhance credibility and investor confidence
Market Impact
The introduction of this guidance is expected to have a significant impact on the sustainable finance market. It will provide issuers with a clear roadmap, encouraging more companies to issue sustainable CP. For investors, the guidance will offer greater assurance that their investments are contributing to genuine sustainability efforts.
The ICMA’s forthcoming guidance on sustainable commercial paper marks a crucial step in the evolution of sustainable finance. By setting clear standards and promoting transparency, the guidance will help foster a more robust and reliable market for sustainable CP, benefiting both issuers and investors.
This new framework is eagerly anticipated and is expected to play a pivotal role in advancing the goals of sustainable finance.
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