ACRA publishes draft methodology for assessment of social debt obligations and sustainable development debt obligations

ACRA has published a draft version of its methodology for assessing social debt obligations and sustainable development debt obligations. The draft is available on ACRA’s website (https://www.acra-ratings.ru/criteria/1917) and is open to comments and suggestions from market participants.

The draft methodology presents ACRA’s approach to assessing the compliance of obligations with the Social Bond Principles, the Sustainability Bond Guidelines published by the International Capital Market Association (ICMA), and the Sustainability Linked Loan Principles that are regulated by the Loan Market Association (LMA).

As part of its assessment, ACRA analyzes the issuer’s approach to project selection, project quality, the effectiveness of the management of raised funds, as well as the issuer’s willingness to provide regular reports on the use of funds. After analyzing these factors, ACRA forms a final assessment varying from SR5/SDR5 (worst) to SR1/SDR1 (best) for social debt obligations and sustainable development debt obligations, respectively, as well as an opinion on the obligations’ compliance/non-compliance with the Principles and Guidelines. In ACRA’s view, this approach is a form of independent evaluation provided for in the Principles and Guidelines, and the assessment is the independent opinion of ACRA acting as a neutral organization.

The importance of financing and refinancing — using social obligations — projects that are focused on resolving socio-economic problems and developing new social and public projects, including additional related expenses, such as carrying out research, should be noted. Sustainable development debt obligations are obligations of a socio-ecological orientation, the purpose of which is to finance projects in the field of sustainable development.

In addition, these instruments are used to finance projects that have a positive impact on the social and socio-ecological spheres, quality of life of vulnerable groups of the population, and also projects whose goal is to achieve the UN’s Sustainable Development Goals. The confirmation of the compliance of a debt instrument with the Principles and Guidelines and the assessment of these financial instruments contributes to the development of the responsible financing market in Russia and globally, and helps investors to invest in projects that have a positive social and socio-ecological impact.

The draft methodology is open to discussion. ACRA encourages all interested parties to submit their comments and suggestions in writing to methodologyGBR@acra-ratings.ru by July 17, 2020. ACRA will consider all suggestions before the final version is approved by the Methodological Committee.

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