Gender-linked bond second party opinion verification

Introduction

As sustainable finance continues evolving, financial instruments integrating environmental, social, and governance (ESG) considerations are gaining prominence across global markets. One such innovation is the Gender-Linked Bond, a type of Sustainability-Linked Bond (SLB) that directly ties financial performance to progress on gender equality metrics. While these instruments have gained traction in more developed markets, their presence in Africa has been limited until now.

A leading South African industrial group sought to break new ground by issuing the continent’s first Gender-Linked Bond, demonstrating a strong commitment to gender equity while aligning with international sustainability standards. To ensure the credibility and robustness of its framework, the organisation engaged IBIS (now SLR and hereafter referred to as SLR) to deliver a Second Party Opinion (SPO) verifying alignment with the International Capital Market Association (ICMA) Sustainability-Linked Bond Principles.

This case study explores how SLR supported the client in designing a pioneering bond framework that integrates gender-focused KPIs and sustainability performance targets, ultimately setting a new benchmark for sustainable finance in Africa.

Challenge

In a bold move to promote gender equality through sustainable finance, a prominent South African industrial group set out to launch the continent's first Gender-Linked Bond. This financial instrument would be a landmark development not only for the company but also for Africa’s capital markets. The objective was to issue a bond framework that would align with the International Capital Market Association (ICMA) Sustainability-Linked Bond Principles, ensuring that gender equality was integrated into the structure of the bond itself.

However, creating a compliant and effective Gender-Linked Bond presented several complex challenges.

Firstly, there was a limited precedent in the region for gender-focused financial instruments, especially within the structure of a Sustainability-Linked Bond. The organisation needed to identify appropriate gender-specific Key Performance Indicators (KPIs) that would be credible, measurable, and aligned with both ICMA guidance and the organisation’s sustainability goals.

Secondly, there was a requirement to calibrate ambitious but realistic Sustainability Performance Targets (SPTs) tied to these KPIs, a critical step that would determine both the rigour and the investor appeal of the bond.

Moreover, the company had to design a comprehensive reporting and verification framework that could provide transparent updates to stakeholders while meeting international standards. This would require a nuanced understanding of both gender metrics and capital market expectations.

Recognising the complexity and importance of the task, the organisation engaged SLR to provide a Second Party Opinion (SPO) with a professional, independent evaluation of whether the framework aligned with ICMA's Sustainability-Linked Bond Principles and integrated meaningful gender considerations.

Solution

SLR approached the assignment with a tailored methodology, leveraging its expertise in both sustainable finance and gender mainstreaming. The engagement was structured around several critical deliverables designed to ensure full compliance with international best practice while positioning the bond as a pioneer within African capital markets.

The first step involved working closely with the client to select and refine gender-focused KPIs. These indicators needed to reflect genuine corporate accountability and deliver measurable outcomes, such as increased representation of women in leadership or improved gender pay parity across operations.

Following this, SLR supported the organisation in calibrating robust and credible SPTs. These targets were developed in line with the organisation's existing gender equity strategies, benchmarked against sectoral and regional data, and stress-tested to confirm that they were both ambitious and achievable.

SLR then guided the client in defining specific characteristics for the Gender-Linked Bond, including trigger events, financial consequences (e.g. coupon step-ups or step-downs), and reporting timelines. This stage ensured that gender outcomes were directly linked to financial performance, a key tenet of the ICMA principles.

To ensure transparency, SLR helped design a reporting and verification framework. This framework established how progress would be tracked, what data would be disclosed, and how often updates would be provided to investors.

Finally, SLR issued a formal Second Party Opinion, verifying that the bond framework was aligned with the ICMA Sustainability-Linked Bond Principles. This opinion added a layer of external assurance and credibility, which was crucial in signalling the bond's integrity to potential investors.

Impact

The successful issuance of Africa’s first Gender-Linked Bond represents a major milestone in sustainable finance for the continent. SLR’s involvement provided the rigour, credibility, and strategic insight necessary for the bond to meet international standards while advancing gender equality.

The client was able to launch the bond with confidence, underpinned by a framework that clearly defined its gender equity commitments and articulated the financial implications of success or failure in meeting them. This innovative structure not only attracted investor interest from ESG-focused portfolios but also served as a model for other African issuers interested in embedding gender into their sustainability-linked financing strategies.

Furthermore, the bond sent a strong signal to the market that gender equality is not only a social imperative but also a financially material issue. It encouraged dialogue across sectors about the role of gender in corporate sustainability, setting a new benchmark for integrated reporting and accountability.

By partnering with SLR, the South African industrial group positioned itself at the forefront of gender-smart investing, contributing meaningfully to the United Nations Sustainable Development Goals, particularly SDG 5: Gender Equality, and establishing a blueprint for future innovation in sustainable finance across emerging markets.