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Second-Party Opinion Download

Project Details


LGFA Sustainable Financing Bond Framework Second-Party Opinion


New Zealand Local Government Funding Agency Limited (LFGA)

Project Type

Sustainable Banking and Finance Services; Sustainability Linked Loan; Sustainability Bond/Loan;

Industry Group


Use of Proceeds

Energy efficiency; Green buildings; Clean transport; Water/waste water management; Renewable energy; Pollution prevention and control; Natural resources/land use management; Climate change adaptation; Conservation; Affordable basic infrastructure; Access to essential services; Affordable housing;


New Zealand

Evaluation Date

Mar 2023

Evaluation Summary

Sustainable Financing Bond Framework

Sustainalytics has reviewed the LGFA Sustainable Financing Bond Framework, (the “Framework”), under which LGFA intends to issue sustainable financing bonds to finance or refinance funding it provides to its member councils and council controlled organizations (the “Borrowers”), and the net proceeds of those sustainable financing bonds will be notionally allocated to a pool of sustainable loans advanced to the Borrowers comprising: i) Green, social and sustainability loans (“GSS Loans”) (see Green, Social and Sustainability Loans Criteria below); and ii) Climate Action Loans (“CALs”) (see Climate Action Loans Criteria below) (together “Sustainable Loans”). Sustainalytics is confident that LGFA is well positioned to issue sustainable financing bonds and use proceeds from the bonds to originate GSS Loans and CALs under its GSS Loan Criteria and CAL Criteria respectively. Sustainalytics is of the opinion that the Framework, as based on the proceeds-based pillars of general market standards for sustainable finance, is overall in alignment with the impact and transparency principles which underpin the sustainable finance market.

Furthermore, Sustainalytics is of the opinion that the components of the Framework are credible and that LGFA’s criteria for assessing the eligibility of loans under the Framework will direct funds to Sustainable Loans that are expected to provide overall positive environmental and social impact. Furthermore, Sustainalytics is of the opinion that the principles of impact and transparency that underlie the sustainable finance industry and many of its norms and standards, are applicable to the sustainable financing bonds LGFA intends to issue, and that LGFA’s internal processes and the use of funds overall aligns with said impact and transparency principles.

LGFA intends to use the Framework to issue sustainable financing bonds following the proceeds-based pillars of the general market standards for sustainable finance, namely the Green Bond Principles (GBP), Social Bond Principles (SBP), and Sustainability Bond Guidelines (SBG). Sustainalytics notes that LGFA does not claim direct alignment of the Framework with these principles, given the nature of the pool of Sustainable Loans, which comprises both GSS Loans and CALs together in the same asset pool.

Green, Social and Sustainability Loans Criteria

Green Loan Principles 2023 and Social Loan Principles 2023

Sustainalytics is of the opinion that the Green, Social and Sustainability Lending Programme – Criteria (“GSS Loan Criteria”) under the Framework is credible and impactful and aligns with the Green Loan Principles 2023, and Social Loan Principles 2023 (the “Use of Proceeds Loan Principles”). The eligible categories for the use of proceeds – Energy Efficiency; Green Buildings; Clean Transportation; Sustainable Water and Wastewater Management; Renewable Energy; Pollution Prevention and Control; Environmentally Sustainable Management of Living Natural Resources and Land Use; Climate Change Adaptation; Terrestrial and Aquatic Biodiversity Conservation; Affordable Basic Infrastructure; Access to Essential Services; Affordable Housing; are aligned with those recognized by the Use of Proceeds Loan Principles and will deliver overall positive environmental and social impacts.

Climate Action Loans Criteria

Sustainability-Linked Loan Principles 2023

Sustainalytics is of the opinion that the Climate Action Loans Programme – Criteria (“CAL Criteria”) for originating and evaluating CALs is partially aligned with the intent of the Sustainability-Linked Loan Principles 2023, and that the KPI and SPT to be used by the Borrowers are expected to be in line with the Sustainability-Linked Loan Principles 2023. The CAL Criteria are in line with the intent of four of the five core components of the SLLP. Sustainalytics recognizes that a primary aim of the CAL Programme is to incentivize Borrowers to achieve ambitious decarbonization targets and considers the mechanism of declassification from the Programme to be an impactful incentive to achieve such targets. However, Sustainalytics considers that the loan (pricing and margin adjustment) characteristics set out in the CAL Criteria are technically not aligned with the SLLP’s loan characteristics component (Component 3 of the SLLP) because the penalty cannot be linked within the same CAL term due to existing accounting standards, but to future CALs.