On 1 April 2021, the SDG Impact initiative published the final version of its SDG Impact Standards for Bond Issuers, part of a body of work intended to improve use of the UN Sustainable Development Goals (SDGs) across private equity, bond issues and enterprises, including to combat perceptions of “rainbow washing” or “impact washing.”
- The Standards have been designed to be capable of complementing green, social and sustainability-linked principles. They are also intended to be consistent with emerging regulatory frameworks, including the EU Taxonomy and the EU Green Bond Standard. In doing so, they provide a robust framework for responding to investor and regulator calls for (a) increased rigour in governance and management, (b) higher levels of ambition for impact, and (c) more transparent evidence of the impact of green, social and sustainability-linked issues. We expect the Standards will be increasingly incorporated in green, social and sustainability-linked issues.
- The Standards emphasise the need to take into account negative, as well as positive, contributions toward the SDGs, and to assess impacts throughout the value chain. This tackles a common criticism of corporate adoption of the SDGs – that the focus is too often only on the positive – and other critiques focusing only on supply chains to the exclusion of value chains. In both respects, the Standards are consistent with emerging regulatory approaches, such as the “do no significant harm” principle embedded in the EU Taxonomy and EU due diligence proposals focusing on value chains.
- The Standards incorporate governance, management, risk and reporting measures consistent with best practices. With the SDG Impact Standards for Private Equity Funds and the forthcoming SDG Impact Standards for Enterprises (a second draft of which is currently out for public consultation until the end of May 2021), they provide a useful set of tools for enhancing corporate governance, conducting due diligence and testing claims of green, rainbow and impact washing.[…]