Posted in GreenBiz
April 20, 2022

Why savvy sustainable bonds are integrating a gender lens

The sustainable bonds market has exploded in recent years, with the issuance of green, social, sustainable and sustainability-linked bonds doubling in the first half of 2021 alone.

For issuers, these bonds are a way to finance meaningful action on climate and sustainability. For investors, they are a way to invest in climate and environment-related projects, and to incentivize businesses to improve their performance on sustainability.

But few green or sustainability-linked bonds to date have incorporated gender or other forms of diversity such as race or ethnicity into their vehicles. This matters, because we know that paying attention to gender and diversity is a key to managing risk and expanding opportunity, and is essential to a just transition. We won’t find and implement the solutions we need if we’re not drawing upon the insights, experience and intelligence of the total population. And we can’t solve for climate mitigation and adaptation if we don’t take into account the needs of the people most affected by the climate crisis.

Many companies that are issuing sustainable bonds are already doing powerful, committed work on both climate and gender. So why not bring them together?

An integrated approach

Recent work by the IFC, ICMA and UN Women highlights how sustainable debt instruments can be used to advance gender equality in both the public and private sectors.

GenderSmart report

Working with IISD and the ASEAN Low Carbon Energy Program, GenderSmart’s Climate & Gender Investment Working Group recently published a how-to guide that builds upon this work with case studies of how some innovative sustainable bond issuers are already integrating gender considerations into their bonds, and proposes a path forward for green bonds to do the same. You can read the full guide here.

The guide looks at two types of bonds: green bonds, which finance climate and environment-related projects; and sustainability-linked bonds, which set specific sustainability performance targets that may increase or decrease bond interest rates if the beneficiary does or does not meet the KPIs.

A number of private companies are already incorporating gender into their sustainability-linked bonds, as part of their broader ESG commitment.

In the guide, the team looks closely at four examples, including French energy company Schneider Electric, which includes the percentage of female employees, managers and women in leadership amongst its sustainability performance targets, alongside CO2 emissions reductions and other workplace diversity targets.

A number of private companies are already incorporating gender into their sustainability-linked bonds, as part of their broader ESG commitment.

Swedish private-equity firm EQT’s sustainability-linked credit facility, meanwhile, requires that any company receiving EQT investment achieve at least 40 percent female board representation within 24 months of the time of acquisition, and that 85 percent of total electricity purchased must come from renewable sources within 30 months.

By definition, green bonds are created to finance projects that meet the issuer’s environmental objectives. But that doesn’t mean that issuers can’t also include gender considerations in the green bond framework — for example, by requiring that projects selected meet specific gender-related criteria around hiring, supply chains or customers. In our guide, we map out what adopting a gender lens could look like in the case of two real but anonymized green bonds.

Stronger together

These examples show that companies don’t have to choose between acting on climate and acting on gender. In fact, integrating gender into your climate commitments can strengthen both areas.

For issuers already committed on climate and gender, integrating gender considerations into sustainable bonds can be a good way to hold yourself accountable on your gender commitments, as well as to distinguish your company in an increasingly crowded sustainable bond market.

For investors, investing in bonds that combine climate with gender considerations is a way to a smarter portfolio. Research by McKinsey found that executive teams with more than 30 percent women are more likely to outperform their peers than those with fewer or no women. On the impact side, a 2021 study by BIS linked an increased share of female managers to lower CO2 emissions across 2,000 listed companies in 24 industrialized economies over a 10-year period. These findings are echoed in research by UC Berkeley’s Haas School of Business and Bloomberg New Energy Finance.

This is a chance to be a leader in a burgeoning arena. As the case studies in our guide show, there are companies out there already integrating gender considerations into sustainable bonds, but the field is still early enough for you to be a first mover.

In the GenderSmart community and Gender & Climate Investment Working Group, we are working across all asset classes and types of investment vehicles. If you’re a bond issuer who is working on integrating gender considerations into your sustainability work, we’d love to hear from you, and to hear your reflections and responses to the guide.

April 20, 2022 at 02:15PM

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