Being a recurrent issuer of Climate Bonds since 2014, AFD now designs a new Framework in relation with UN Sustainable Development Goals (SDGs). Indeed, SDGs are at the heart of AFD Group’s strategy and are fully incorporated into the loan identification and selection processes. AFD is thus aligning bonds issued on capital markets with its missions and activities towards its customers.
With this framework, AFD tries to respond to investors requests for sustainable investment, transparency, consistency and impact reporting. Of course, AFD respects standards set by ICMA, the Green Bond Principles, Social Bond Principles, and Sustainable Bond Guidelines. Vigéo Eiris, as a second party opinion provider, gave to AFD SDG Bond Framework the best rating.
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"The SDG bonds are a powerful way to support the implementation of a low carbon and just transition that the Covid-19 crisis has only made more urgent and more vital, says Rémy Rioux, AFD’s CEO. This initiative demonstrates how public development banks have been at the forefront of the green and sustainable bond market, by addressing investors’ request for positive impacts for people and for planet, contributing to reach SDGs."
An “impact by design” approach
Because of the eligibility criteria, loans will be selected by their contribution to the SDGs. The issuance Framework takes into account the interplays between the SDGs (“do not significant harm”): a loan is eligible if it has a positive or neutral grade in all six dimensions in the sustainable development analysis and opinion.
Loans eligible also must finance projects whose activities correspond to the six transitions targeted by AFD group, with quantitative impacts measured during identification process. Loans with climate performance eligibility – having an impact on climate change mitigation – or transformation eligibility – loans conditioned on reaching sustainable development results – are also eligible.
"We have noticed that several bond frameworks or climate and social bond reportings refer to SDGs, says Thibaut Makarovsky, head of funding and market operations at AFD. However, these references are only a thematic “mapping” of the eligible categories or an ex-post analysis of the contribution. They are rather a “labelling”, without a clear demonstration of the contribution of the issuer towards SDGs’ achievement. The AFD Group’s SDG issuance Framework has adopted an “impact by design” approach that selects loans according to their actual contribution to the SDGs, through a robust identification process. This is how it differs from other bond frameworks."