AFME has today published the first ever set of ESG guidelines for the European high yield market. The guidelines are intended to provide guidance on sustainable finance considerations for issuers and investors when leading or otherwise participating in offerings of non-investment grade notes (known as “high yield bonds”).
 

The guidelines make recommendations for considerations and practices to encourage transparency and consistency in disclosure, as well as recommendations for due diligence practices related to such transactions.
 

They are intended to assist the market by providing  a framework for assessing relevant ESG factors, including:

• Disclosure and Diligence considerations;
• Impact of ESG factors on an issuer’s strategy and business model; and
• Exposure of an issuer to ESG risks, both at issuer  and stakeholder level including sponsors and shareholders.
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Gary Simmons, Managing Director of AFME’s High Yield Division, said:

“ESG finance is a fast-evolving market. While both market practitioners and policymakers are placing increased emphasis and importance on ESG financing, the market is still lacking in overall consistency, with many decisions being made on a deal-by-deal basis.  

“We want to make sure that European high yield markets are able to run as efficiently and effectively as possible, especially as they support  recovery from the COVID-19 crisis. These guidelines aim to provide structure and consistency to the  market, balancing issuers’ ability to provide information with investors’ needs for clear, transparent information to support their investment decisions.”

Anna-Marie Slot,  Ashurst’s head of High Yield and Global Sustainability/ESG Partner, said:

"The markets operate best with transparency and disclosure.   This AFME ESG framework, which reflects the work of many, is a key tool for market participants in the increasingly critical area of climate change and the risks assessment that the markets need to be making around ESG considerations."  

Dominic Ashcroft, Chair of the AFME High Yield Division and Co-head of EMEA Leveraged Capital Markets at Goldman Sachs, added:

“We continue to see from both investors and issuers increasing focus on ESG topics.  These guidelines are an important first step in helping companies navigate the subject and ensuring appropriate disclosure is produced to greater empower investors in their investment decision making.”

The Guidelines are available here.

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