It can be assumed that in the context of an approval that would be requested from the AFM as competent regulator for a prospectus that deals with the offering of 'sustainable bonds', this approval will only be obtained if the prospectus sufficiently takes into account these expectations of the AFM. Nonetheless, we believe that these recommendations are also useful for offerings of bonds which can benefit of an exemption under the Prospectus Regulation, either because the offering is targeted at qualified investors only or because the bonds have a minimum denomination of EUR 100,000.
In essence, all necessary information that is material for investors to make an informed assessment should be included. For example, issuers should not present themselves as more sustainable than they are. If an issuer presents itself as "sustainable" in the prospectus, the basis for this must be described objectively.
While we are awaiting the final text regarding the EU Green Bond standard which could become effective as early as the second half of 2024, the below guidance of the AFM may assist both issuers and investors by providing guidance on what to include in prospectuses or other offering documents relating to green bonds.
Use of clear terminology
For the sake of clarity of the prospectus, 'sustainable terminology' (including sustainable objectives) must be specifically explained or substantiated. This applies especially in the case of specific sustainability claims.
Specification of the use of proceeds
The use of the proceeds of the issue should be described as specifically as possible in the prospectus. If a base prospectus has been made generally available for the issuance of bonds under a debt securities program and the exact allocation of the proceeds is only specified in the final terms, then specific placeholders should be included in the "Form of Final Terms" section so that, in the case of a specific issuance, the allocation of the proceeds is described as concretely and specifically as possible in the applicable final terms.
Description of the (intended/unintended) impact/reduction pre-issuance
To enable investors to assess the sustainability features, the prospectus should include as specific as possible a description of the (intended/unintended) impact/reduction pre-issuance at individual issue level or, if in specific cases only a so-called portfolio approach is used instead of at individual issue level, at portfolio level.
Description of ESG Standards applied
Furthermore, it is important that the prospectus clearly describes whether, and if so, which ESG standards have been adhered to. According to its recommendations, the AFM expects at least an explanation of the extent to which the issue corresponds to the EU Taxonomy Regulation.
Other transparency requirements
The AFM also expects the prospectus to clearly describe how the bond contributes to the sustainability objectives of the issuer and how the issue fits within the broader strategy and objectives of the issuer.
If a proprietary green bond framework is used, its key points should be included in full in the prospectus and the full sources should be incorporated by reference in the prospectus.
A similar transparency obligation applies to how investors can learn about "post-issuance" information if the issuer has expressed an intention to do so.