EIOPA · 2520
Reporting Templates
- Regulation
- (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
- Article
- ANNEX IV, ANNEX V, ANNEX VI
- Topic
- Reporting Templates
- Submitted
- 2022-10-27
- Answered
- 2023-05-04
Question
My question refers to the classification of sustainability-linked bonds (SLBs) - issued by a private firm - within the CIC taxonomy.
Should these instruments be classified as CIC 29 (Corporate bonds - Other) or 59 (Structured notes - Other)?
Background
Argument in favor of CIC 29: An SLB is basically a bond (2), but not a traditional one, hence other (9).
Argument in favor of CIC 59: An SLB is indeed a bond but within the total coupon there is a random component whose payment depends on whether an environmental or social goal is (not) achieved. Even if this random component is not strictly speaking a derivative component, it is close to it in the spirit.
The regulation indeed provides for CIC 5: "Hybrid securities, combining a fixed income (return in the form of fixed payments) instrument with a series of derivative components."
Answer
Given the provided limited information on the sustainability-linked bonds, the CIC classification 5- structured notes may seem to be correct.
CIC 5 – Structured notes cover “securities that have embedded one or a combination of categories of derivatives". The classification should be done on a risk perspective. Therefore based on the provided information that “it is close to it in the spirit" to a derivative, the description may fit best the classification for structured notes.
This Q&A is published by European Insurance and Occupational Pensions Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.
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