IOSCO Releases Five-Point Plan to Support Sustainable Bond Market Growth
The International Organization of Securities Commissions (IOSCO) has released its much-anticipated Sustainable Bonds Report, spotlighting the rapid expansion of the sustainable bond market and proposing key regulatory considerations to support its continued development.
Sustainable bonds, which include green, social, sustainability, and sustainability-linked bonds, have emerged as a major component of sustainable finance, with growing interest from both issuers and investors. According to IOSCO, total sustainable bond issuance in 2024 reached USD 1.1 trillion, reflecting a 5% increase over 2023. The cumulative issuance now exceeds USD 6 trillion, with strong growth expected in the years ahead.
Recognizing both the opportunities and the risks in this fast-evolving market, IOSCO’s new report outlines five core factors to guide regulators and market participants. These are aimed at strengthening investor protection, ensuring market integrity, and improving overall accessibility.
The five recommendations include:
- Clarifying regulatory frameworks to align with global standards, encourage consistency, and bolster investor confidence while backing market participation.
- Establishing clear definitions and categories for various sustainable bond types to reduce confusion and improve transparency.
- Enhancing disclosure requirements for issuers to publicly report progress toward sustainability performance targets (SPTs), thus promoting accountability.
- Encouraging independent reviews by third-party assessors to reduce potential conflicts of interest.
- Promoting education and awareness through training and capacity-building programs for issuers, investors, and regulators.
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The report draws on a mix of research, member surveys, and stakeholder engagement, including a joint roundtable with the OECD during IOSCO’s 2024 Annual Meeting. The findings reflect a global perspective, taking into account experiences from both advanced and emerging markets.
Jean-Paul Servais, IOSCO board chair and head of Belgium’s Financial Services and Markets Authority, emphasized the significance of the report. “IOSCO has continued to examine green finance products with our core objectives in mind. This report sets out key considerations for interested jurisdictions when seeking to foster a well-functioning sustainable bond market,” he said.
The Co-Chair of IOSCO’s Green Finance and Innovation Workstream and Executive Chairman of Egypt’s Financial Regulatory Authority, Dr. Mohamed Farid, said the report aligns with IOSCO’s goals of investor protection and transparency. “It offers a comprehensive view of emerging practices in sustainability bond markets across different regions,” he noted.
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Last but not least, the CEO of the Ontario Securities Commission and fellow Co-Chair of the Workstream, Grant Vingoe, highlighted the global reach of the findings. “Our goal for the Report was to identify the distinctive features of sustainable bonds and outline various approaches used to regulate these products. The research conducted for the Report reflects a broad range of global insights from IOSCO members and market participants on this important emerging trend in the capital markets.”
With sustainable finance playing a growing role in achieving climate and social goals, IOSCO’s guidance is expected to help shape the future of the global bond market, one that is both credible and aligned with long-term impact.
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Source: Disruption Banking
