Posted Date: April 18, 2018

MARC has published for comment an exposure draft which outlines the rating agency’s Impact Bond Assessments (IBA) Criteria. An IBA is not a credit rating and is independent of the credit quality of the bond concerned. IBAs can be assigned to green bonds, social bonds or sustainability bonds including sukuk issued under Malaysia’s Sustainable and Responsible Investment (SRI) Sukuk Framework. This methodology incorporates internationally recognised principles and market standards for the evaluation of such bonds such as the Green Bond Principles (GBP), Social Bond Principles (SBP), Sustainability Bond Guidelines (SBG) and the ASEAN Green Bond Standards (AGBS).

MARC’s analytical framework for evaluating the sustainability credentials of impact bonds (green and/or social) consists of three components: (1) an impact significance analysis or benefit assessment of the underlying funded project(s); (2) an assessment of compliance with the market standards such as AGBS, GBP or SBP and/or SBG, as applicable; and (3) an evaluation of the issuer’s sustainability implementation capacity and performance.

MARC’s IBAs are assigned on a descriptive scale and are expressed using a ‘Gold-Silver-Bronze’ grading system. The assessment is largely pass/fail; impact bonds will have to meet the minimum thresholds in each of three analytical components to be graded Gold, Silver or Bronze. Impact bonds that are unable to demonstrate that they meet the minimum thresholds will not receive an IBA grade. The minimum grade and score thresholds for each of the three analytical components of MARC’s IBA are set relatively high in order to maintain the value and integrity of each MARC-assigned IBA.

MARC believes that its IBA will help to bring sustainable finance into the mainstream by making it easier for sustainably minded investors to identify bond and sukuk investments that will support sustainability. Such investments are vital for transitioning the domestic economy onto a more sustainable footing.

MARC welcomes comments on any aspect of the draft methodology during the comment period and will consider all comments received in writing by May 8, 2018. Comments on the exposure draft should be sent to ratingmethodology@marc.com.my. All responses will be regarded as on the public record unless confidentiality is requested by the commentator.

The aforementioned exposure draft can be accessed on MARC’s website at Impact Bond Assessments.

Milly Leong, +603-2717 2938/ milly@marc.com.my