Financial Markets Standards Board (“FMSB”) has today published a Statement of Good Practice (“SoGP”) on the Governance of sustainability-linked products (“SLPs”) in Transparency Draft.
The SoGP is intended to codify good practices for the governance of SLPs and support the adoption of consistent governance approaches across asset classes and jurisdictions.
SLPs are products whose financial and/or structural characteristics can vary depending on whether the User achieves specific sustainability or ESG objectives. These objectives are measured through pre-defined key performance indicators and assessed against sustainability performance targets. Unlike use-of-proceeds instruments, SLPs can be used for general corporate purposes, providing a flexible alternative for many Users to access the sustainable finance market.
Establishing industry-led good practice around the governance of SLPs can help improve the quality and integrity of SLPs; mitigate social or greenwashing risks; increase market confidence and investor trust in such instruments; and support the development of a deeper, more robust sustainability-linked product market.
The SoGP is intended to apply to Service Providers 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 SoGP was developed by a Working Group of practitioners from across the wholesale markets, led by Caroline Haas, Head of Climate and ESG Capital Markets at NatWest Markets and Chair of FMSB’s ESG Committee.
Next steps:
The Transparency Draft SGoP is available on FMSB’s web site: Statement of Good Practice: Governance of sustainability linked products and is open for consultation until 21st February 2025. Please address any comments and/ or questions to secretariat@fmsb.com
Notes to editors
About FMSB:
- Financial Markets Standards Board (FMSB) is an industry-led, member-funded global standards body for the wholesale financial markets.
- Created out of the Fair and Effective Markets Review (FEMR) in 2015, FMSB brings together its Members from banks, investment institutions, infrastructure and information providers, corporates, pension funds and interdealer brokers, to develop Standards, Statements of Good Practice and Spotlight Reviews that raise standards of behaviour, competence and awareness – to promote the fairness and effectiveness of global wholesale financial markets.
- As well as standard setting, subject matter experts from member firms debate issues in working groups and are able to benchmark their approaches against industry peers, thus helping to lift standards of conduct.
- FMSB’s full membership list is here