A set of ESG guidelines for the European high yield market, the first of its kind, has been recently published by the Association for Financial Markets in Europe (AFME).
These welcome guidelines build on already existing best-practice frameworks for ESG bonds and provide sector-specific recommendations on green finance considerations for both issuers and investors with respect to offerings of high yield bonds in Europe.
The ESG guidelines provide recommendations in relation to the considerations and best practices to comply with, in order to encourage transparency and consistency on all aspects of transactions, from due diligence practices to disclosure. Notably, the ESG guidelines feature a 'High Yield ESG Due Diligence Questionnaire', that can complement and be integrated into routine due diligence questionnaires prepared by underwriters.
Additionally, the ESG guidelines successfully break down the range of relevant ESG factors relevant to European high-yield bonds and explain how these factors impact on an issuer's strategy and business model as well as the exposure of issuers to ESG-related risks.
The ESG guidelines in full are available here.
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.