1.    GENERAL INFORMATION ON SUSTAINABILITY-LINKED BONDS (SLBs) AND SECOND PARTY OPINIONS (SPOs)
Sustainability-linked bonds (SLBs) are debt instruments designed to further strengthen the pivotal role that debt capital markets can play in financing and supporting companies that contribute to sustainability. The structure of these bonds is based on a mechanism under which the bond’s financial and/or structural characteristics (e.g., coupon rate, redemption premium) may change depending on whether the issuer achieves pre-defined Sustainability Performance Targets (SPTs) linked to selected Key Performance Indicators (KPIs). This approach establishes a direct link between the issuer’s sustainability strategy and its financial commitments, enabling both environmental and social performance to be translated into measurable and traceable outcomes for investors.
A Second Party Opinion (SPO) methodology aims to assess, in an objective manner, the issuer’s sustainability strategy, selected KPIs, defined SPTs, bond features and characteristics, as well as reporting and verification processes-primarily in terms of alignment with internationally recognized standards and the level of transparency. Based on this assessment, an independent score/rating is assigned.
The SPO assessment is conducted on the basis of the issuer’s framework document, KPI and SPT definitions, the underlying methodology, monitoring and reporting commitments, and any additional information and documentation provided prior to issuance. The review adopts a holistic approach covering the materiality of KPIs, the level of ambition of SPTs, alignment with national and international reference points, the clarity of the financial and/or structural consequences to be applied in the event that performance targets are (or are not) achieved, and the credibility of reporting and verification processes.
An SPO is prepared at a specific point in time (point-in-time), prior to issuance, based on information and data provided by the issuer, and it provides an ex-ante assessment of the issuance’s alignment with the ICMA Sustainability-Linked Bond Principles and/or relevant guidance. Unlike use-of-proceeds instruments, the SLB structure requires ongoing post-issuance monitoring of performance targets and financial outcomes throughout the bond’s life, supported by annual reporting and independent verification mechanisms.  
The methodology also includes a comparative analysis of the issuer’s KPI–SPT structures against international benchmarks and prevailing market practices, with the aim of strengthening the credibility of the issuer’s commitments among investors and stakeholders and enhancing the comparability of assessments.
The importance of an SPO stems from the following key elements:
Transparency and Credibility: An assessment performed by an independent second party helps validate the accuracy and consistency of the information disclosed by the issuer. By independently analyzing whether the defined sustainability performance targets are ambitious, measurable, and aligned with international standards, an SPO strengthens market confidence.
Enhancing Market Acceptance: By evidencing that sustainability-linked bonds and loans are structured in line with internationally recognized sustainable finance principles, an SPO supports investors in adopting these products with greater comfort. Moreover, many institutional investors and asset managers have established policies to invest only in sustainability-linked bonds that have obtained an independent SPO. As a result, an SPO can help the instrument reach a broader investor base.
Mitigating Greenwashing and Socialwashing Risk: Greenwashing and socialwashing refer to the provision of misleading or exaggerated claims by companies or financial institutions to portray environmental and/or social performance as more sustainable or positive than it truly is. As such incidents increase, investor confidence in sustainability-linked instruments may weaken. By assessing whether SPTs are genuinely ambitious, measurable, and transparently defined -and whether the selected KPIs are concrete, comparable, and aligned with internationally recognized standards- an SPO helps reduce greenwashing and socialwashing risks.
Lower Cost of Funding and Stronger Investor Demand: Sustainability-linked bonds are attracting rapidly growing interest among global investors. By committing to achieve defined SPTs, issuers can provide investors with stronger long-term confidence. This confidence may enable issuers to access funding on more favorable terms. By evaluating whether SPTs are ambitious, measurable, and transparent, an SPO further reinforces investor interest in sustainable finance products and can support issuers in reducing their cost of funding.
Supporting the Issuer’s Sustainability Strategy: Beyond enhancing investor confidence, an SPO can help issuers integrate SLB performance commitments more effectively into their broader corporate strategy. The process enables companies to measure environmental and social impacts through KPIs and SPTs, identify strategic gaps, implement improvements, and continuously enhance sustainability performance over the long term within a structured roadmap.
2.    CORE PRINCIPLES AND REFERENCE FRAMEWORK UNDERPINNING SPO ASSESSMENTS
2.1    Establishment of Sustainability Principles
Within the methodology, the primary basis of the assessment is the degree to which the Sustainability Performance Targets (SPTs) defined by the issuer -and the associated Key Performance Indicators (KPIs)- are aligned with national and international sustainability principles. In this context, social objectives such as poverty reduction, social inclusion, equality, and decent work opportunities are considered alongside environmental objectives such as reducing carbon emissions, improving energy efficiency, advancing circular economy practices, and conserving natural resources. For instance, setting ambitious emissions-reduction targets across own operations and/or the value chain, developing measurable performance commitments to increase workforce diversity, strengthening efficiency KPIs in energy-intensive sectors, or integrating a net-zero roadmap into strategic planning are treated as tangible indicators of environmental and social sustainability.
2.2    International Standards and Regulatory Frameworks
The assessment and analysis are conducted with reference to internationally recognized sustainability standards and regulatory frameworks. Accordingly, the key principles set out in the Sustainability-Linked Bond Principles (SLBP) published by the International Capital Market Association (ICMA) serve as the primary reference. In addition, the issuer’s selected KPIs and defined SPTs are evaluated in light of global reference frameworks such as the United Nations Sustainable Development Goals (SDGs), the European Union Taxonomy, TCFD, and SBTi. The guiding principles highlighted in the “Sustainability-Linked Capital Market Instruments Guidelines” published by the Capital Markets Board of Türkiye (CMB/SPK) are also taken into consideration. This approach enables an objective assessment -under the criteria of ambition and measurability- of the extent to which the issuer’s commitments align with global standards and regulatory requirements.
Below is a summary overview of the international regulations, standards, and principles that may be referenced in the design of sustainability-linked bonds (SLBs).
2.2.1    Core Market Standards and Principles
•    ICMA Principles and Guidance
The ICMA Principles and related guidance -widely referenced across green, social, sustainability, and sustainability-linked bonds- play a key role in establishing expectations for impact measurement, disclosure, and transparency. For sustainability-linked bonds in particular, these principles provide a clear basis for defining performance indicators and targets, and therefore constitute a key benchmark for SPO assessments. 
    Green Bond Principles (GBP): Provide standards for transparency, reporting, and disclosure in relation to the allocation of bond proceeds to environmentally beneficial projects.
    Social Bond Principles (SBP): Establish similar transparency and reporting requirements for the financing of projects intended to deliver positive social outcomes.
    Sustainability Bond Guidelines (SBG): Offer a comprehensive framework for financing projects that incorporate both environmental and social elements.
    Sustainability-Linked Bond Principles (SLBP): Define performance indicators and targets that link bond characteristics to the achievement of specified sustainability objectives.
Within the scope of a Sustainability-Linked Bond SPO methodology, the criteria set out in the Sustainability-Linked Bond Principles (SLBP) are of critical importance. 
•    EU Regulations
Key EU regulatory reference points include the EU Taxonomy Regulation and the EU Green Bond Standard (EU GBS).
    EU Taxonomy Regulation: While primarily designed to classify environmentally sustainable economic activities and therefore most directly applicable to use-of-proceeds instruments, it can also play an indirect role for sustainability-linked bonds. In particular, the ambition of an issuer’s environmental and/or social KPIs and SPTs can be assessed more objectively by benchmarking them -where relevant- against EU Taxonomy technical screening criteria and the “Do No Significant Harm” (DNSH) requirements.

    EU Green Bond Standard (EU GBS): This is not directly applicable as a binding framework for sustainability-linked bonds. However, the transparency, verifiability, and reporting requirements it introduces may be referenced as good-practice benchmarks for SLB reporting. This can be particularly useful in strengthening comparability when presenting KPI/SPT performance to investors.

EU initiatives also provide indirect support to SLBs through frameworks that aim to enhance the classification and disclosure of social investments. For example:
    EU Social Taxonomy (Draft): A proposed classification framework intended to assess the contribution of economic activities to social objectives (e.g., fair working conditions, access to essential services, social inclusion). Where social KPIs/SPTs are defined within an SLB structure, relevant indicators and concepts from this framework may be used as supporting reference points.
    Sustainable Finance Disclosure Regulation (SFDR): Standardizes how institutional investors disclose environmental and social factors. Where an SLB issuer’s reporting approach is aligned with SFDR-related concepts and data expectations, investors may be better positioned to evaluate both the financial implications and the sustainability performance of the instrument.
Overall, while EU regulations do not introduce a dedicated, directly binding “SLB standard,” they can function as robust reference frameworks for SPT calibration, transparent reporting, and the measurement and disclosure of environmental and social contributions.
2.2.2    Other International Initiatives and Regulatory Frameworks
•    United Nations Sustainable Development Goals (UN SDGs):
The UN SDGs encourage countries and companies to contribute to sustainable development across environmental, social, and economic dimensions. In the context of SLBs, the issuer’s selected Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) can be mapped to relevant SDGs, making it possible to clearly articulate which global sustainability objectives the bond is intended to support.
•    Equator Principles
Although primarily developed for large-scale project finance, the Equator Principles may also serve as a reference framework for assessing an issuer’s institutional capacity for environmental and social risk management in the context of sustainability-linked bonds. They can support the integration of SLB KPIs and SPTs not only with financial or environmental metrics, but also with corporate risk management and societal impact considerations-thereby enabling investors to evaluate sustainability performance through a broader and more robust lens. 
•    IFC Performance Standards
The IFC Performance Standards provide a strong reference framework for SLBs by offering a comprehensive basis for identifying, assessing, and managing environmental and social risks that may arise not only in individual projects but across the issuer’s overall operations. Where KPIs and SPTs are designed in alignment with the IFC Performance Standards, both social themes (e.g., labor rights, community impacts, resettlement risks) and environmental themes (e.g., carbon emissions, natural resource use, biodiversity) can be addressed in a more holistic and structured manner.
•    IRIS+ System (Global Impact Investing Network – GIIN)
IRIS+ provides a comprehensive indicator set and methodological infrastructure for measuring and reporting social outcomes in sustainability investments. For SLBs, aligning the issuer’s KPIs and SPTs with IRIS+ indicators can help anchor target tracking within an internationally recognized framework and improve consistency for impact-related disclosures-particularly for social KPIs. 
•    Global Reporting Initiative (GRI)
GRI is an internationally recognized set of standards that enables comprehensive, comparable, and transparent reporting of environmental, social, and governance (ESG) performance. For SLBs, GRI serves as a key reference point for issuers to report KPIs and SPT progress in a consistent, measurable, and comparable manner. 
•    Task Force on Climate-related Financial Disclosures (TCFD)
TCFD provides recommendations to integrate climate-related risks and opportunities into financial planning and disclosure. The framework encourages issuers to disclose climate-related KPIs and related SPTs in a transparent, comparable, and investor-relevant manner. In the SLB context, TCFD can guide issuers in explaining how selected targets relate to climate risk exposures and what the long-term financial implications of meeting (or missing) those targets may be. 
•    Transition Plan Taskforce (TPT)
TPT provides a framework for companies and financial institutions to disclose transition strategies toward a low-carbon and sustainable economy in a transparent and comparable way. In the SLB context, TPT principles can directly support the coherent calibration of SPTs within an integrated strategy-helping demonstrate that targets are embedded in an overall transition plan rather than being isolated commitments.
•    Climate Bonds Initiative (CBI) – Triple A Transition Plan Framework
Developed by the Climate Bonds Initiative, the Triple A Transition Plan Framework provides a comprehensive reference for evaluating corporate transition plans across the dimensions of Ambition, Action, and Accountability. Given its cross-sector comparability and its reliance on science-based transition pathways, it is widely viewed as one of the most important reference frameworks for strengthening SLB methodologies at a global level.
•    Just Transition Principles (Adil Geçiş İlkeleri)
Just Transition principles emphasize that the shift to a low-carbon economy should be inclusive and socially equitable, not only environmentally effective. Drawing on sources such as the ILO, the Paris Agreement, and broader UN social policy frameworks, these principles aim to ensure that workers, communities, and vulnerable groups are protected during transition and have access to new opportunities, thereby reducing the risk of widening social inequalities. In an SLB context, they can inform the design of social KPIs/SPTs and strengthen the social legitimacy of climate-related targets.
•    OECD Guidelines for Multinational Enterprises
The OECD Guidelines provide a comprehensive framework for responsible business conduct by multinational enterprises, setting good-practice standards across ESG areas. They offer guidance on topics such as human rights, labor standards, environmental responsibility, consumer interests, and transparent reporting. Within the SPO process, the OECD Guidelines are a critical reference point for testing whether an issuer’s targets are not merely “green” or “social” in appearance, but are also aligned with internationally recognized responsible business conduct expectations.
•    ILO Fundamental Conventions:
For SLBs, the ILO Fundamental Conventions support the credibility and measurability of SPTs not only in environmental terms but also across social dimensions. They are particularly important in mitigating socialwashing risk, as they provide a baseline for protecting workers’ rights and ensuring safe and fair working conditions-strengthening the long-term social legitimacy of sustainability-linked instruments.
•    Science Based Targets initiative (SBTi)
SBTi is one of the most widely recognized global frameworks for setting greenhouse gas emissions reduction targets that are science-based and aligned with the Paris Agreement. SBTi-validated targets are widely used as reference points by regulators and industry stakeholders and can strengthen the alignment of an SLB with prevailing market standards-particularly where climate-related KPIs and SPTs are central to the instrument.
•    Carbon Disclosure Project (CDP)
CDP is a globally established disclosure platform that enables companies to report performance on climate change, water security, deforestation, and related environmental themes in a transparent manner. In the SLB context, CDP reporting can support the assessment of historical and current performance within a standardized, comparable, and externally recognized disclosure framework.
•    Principles for Responsible Investment (PRI)
PRI is among the most comprehensive global initiatives promoting the integration of ESG factors into investment decision-making. While enabling investors to assess companies through the lens of sustainability performance, PRI-aligned approaches also provide issuers with a strong reference point for integrating sustainability targets into financial strategy. They can also strengthen ESG risk management, stakeholder engagement, and reporting practices relevant to SLBs.
•    Impact Reporting Working Group (IRWG – ICMA)
The ICMA Impact Reporting Working Group develops methodological guidance and indicators to standardize impact reporting in sustainable finance. Its “Harmonised Framework for Impact Reporting” publications are widely used references for measuring and reporting project-level impacts in green and social bonds. While SLBs are not use-of-proceeds instruments, these publications may still serve as useful good-practice references-particularly where issuers also disclose outcome metrics linked to the KPIs/SPTs. 
•    Loan Market Association (LMA), Asia Pacific Loan Market Association (APLMA) ve Loan Syndications and Trading Association (LSTA):
LMA, APLMA, and LSTA are key global bodies supporting transparency, standardization, and risk management in sustainable finance instruments. In the SLB context, the standardized documentation and guidance they provide support the clear, measurable, and comparable integration of KPIs and SPTs into loan or bond documentation. LMA, through its Europe-centered standard documents and approaches, supports the transparent definition of performance commitments within investor-facing contractual terms. APLMA contributes by reflecting Asia-Pacific market dynamics and helping align SLB practices with regional regulatory considerations. LSTA, while focused on standards that enhance transparency and liquidity in secondary markets, can also support the correct integration of SLB performance metrics into trading and settlement processes. 
2.2.3    Financial Reporting Standards
•    IFRS S1: Ensures that sustainability-related financial disclosures are presented in an integrated and coherent structure. Under this standard, companies are required to incorporate into their reporting the financial implications of the KPIs they have selected and the associated SPTs. This enables investors to more clearly understand how sustainability commitments may affect the issuer’s overall business model and financial position.
•    IFRS S2: Makes the financial impacts of climate-related risks more visible. The standard facilitates transparent and comparable reporting of climate-focused SPTs-such as those related to emissions reductions, energy efficiency improvements, or the transition to renewable energy.
•    European Financial Reporting Advisory Group (EFRAG) – ESRS Standards: Form part of the European Union’s mandatory sustainability reporting regime. In particular, ESRS S1–S4 provide a comprehensive set of indicators across social themes, covering workforce conditions, the rights of workers in the value chain, affected communities, and consumers/end-users, including the associated risks, impacts, and opportunities.
•    SASB (Sustainability Accounting Standards Board) Standards: Identify financially material sustainability topics on a sector-by-sector basis, thereby highlighting the indicators that are most decision-useful for investors. Now integrated under the IFRS Foundation alongside the ISSB, SASB supports the application of IFRS S1 by providing sector-specific depth and practical implementation guidance.
The frameworks referenced above represent internationally recognized benchmarks for structuring and assessing green, social, sustainability, and sustainability-linked bonds. Accordingly, the criteria within these standards and regulations that are relevant to sustainability-linked bond issuances are taken into consideration.
2.3    Market Best Practices
Best practices go beyond merely meeting minimum requirements; they also encompass the development of innovative approaches that are firmly anchored in the issuer’s long-term sustainability strategy, strengthen investor confidence, and reinforce overall market credibility. In this context, designing performance-based financial mechanisms (e.g., coupon step-up or step-up/step-down structures) in a way that is sufficiently meaningful to influence investor behavior, supporting targets through periodic interim reporting, and publishing third-party verification outcomes in a transparent manner are commonly regarded as hallmarks of market best practice. 
2.4    Data Sources and Information Transparency
For sustainability-linked bonds (SLBs), the SPO assessment process is built on the issuer’s official documentation and disclosures, including KPI definitions, SPT methodologies, and descriptions of performance-linked financial structures. These materials are analyzed as concrete and measurable evidence underpinning the issuer’s sustainability claims. In addition, independent third-party assurance reports, sector benchmarks, international datasets, and publicly available reporting practices are used to validate the accuracy and completeness of the information provided. 
3.    SPO ASSESSMENT PROCESS
The assessment process comprises five main stages designed to ensure an objective, multi-dimensional, and comparable review of the issuer’s framework document, sustainability commitments, KPI definitions, SPT calculation methodologies, financial impact mechanisms, and related documentation.
The figure below presents the steps of the SPO assessment process.
Figure 1: SPO Assessment Process
 
3.1    Data Collection and Preliminary Review
In the first stage, the issuance framework document, KPI definitions, methodologies for setting the SPTs, the bond’s financial structure (e.g., step-up/step-down mechanisms), and issuer disclosures are collected in detail. These documents demonstrate which sustainability objectives the instrument is linked to, the baseline values and measurement approaches for the targets, and how the performance-linked financial consequences have been designed. 
3.2    Analysis and Assessment
Building on the information gathered during data collection, the assessment proceeds to a comprehensive analytical phase. This is a critical stage in which the issuer’s environmental and social performance -considering the sector in which it operates- as well as its defined KPIs and SPTs are reviewed in depth. The analysis is shaped by international standards specific to sustainability-linked bonds (e.g., ICMA SLBP, TPT, SBTi, TCFD) and by sector best practices, under which the relevant indicators and evaluation criteria are assessed. The review is conducted across five core sub-sections:
3.2.1    Key Performance Indicators (KPIs)
The issuer’s KPIs are evaluated in terms of scope, measurability, verifiability, and alignment with both the sector context and the issuer’s sustainability strategy. Particular attention is paid to whether KPIs are integrated into the sustainability strategy, supported by high-quality data, and sufficiently comparable at the international level. In addition, alignment with non-financial reporting standards (e.g., GRI, SASB, ESRS) and overall usability for investor analysis are assessed. 
3.2.2    Sustainability Performance Targets (SPTs)
The SPTs defined for each KPI are reviewed with respect to baseline values, target dates, methodologies, and calculation approaches. The level of ambition is assessed relative to sector averages, science-based pathways (e.g., SBTi), and longer-term strategic commitments (e.g., net-zero goals). This stage determines the extent to which the SPTs move performance beyond the issuer’s current level and how ambitious they are when benchmarked against prevailing market practices. 
3.2.3    Bond Characteristics and the Link to Targets
The linkage between the bond’s financial structure (e.g., coupon level, step-up/step-down mechanisms, repricing terms) and the KPIs/SPTs is evaluated in detail. It is considered critical that this linkage is defined in a transparent and measurable manner and is communicated in a way that is understandable to investors.
3.2.4    Reporting
The reporting approach is assessed in terms of frequency, scope of content, and the level of transparency that enables investors to track KPI and SPT progress. The review considers whether reports are prepared with sufficient granularity to evaluate target ambition, whether underlying data sources are reliable, and whether disclosures are aligned with international reporting frameworks (e.g., TCFD, GRI, CDP).
3.2.5    Verification
The existence, scope, and frequency of independent third-party verification are assessed. The review considers whether the verification process is structured in alignment with the ICMA SLBP and broader international ESG standardization practices. Annual verification of KPIs and SPTs -together with additional verification at key points when target achievement is expected- is treated as a critical element that enhances methodological credibility.
3.3    Scoring Process
The scoring stage translates the findings from the analysis and assessment into a numerical and comparable system. The objective is to determine the extent to which the issuer’s selected KPIs, defined SPTs, and the bond’s structural features demonstrate sustainability contribution in a credible, ambitious, and transparent manner. The assessment is conducted across five main categories: Key Performance Indicators (KPIs), Sustainability Performance Targets (SPTs), Bond Characteristics and the Link to Targets, Reporting, and Verification. Category-level scores are calculated through the questions assessed under each category.
Each category is weighted to reflect its relative contribution to the overall assessment framework, and these weightings may be differentiated depending on sector dynamics. The resulting total score is then converted into an SPO rating on the SLB1–SLB10 scale. This scale is designed to rate the issuer’s capacity to deliver on sustainability-linked commitments, its alignment with market best practices, and overall credibility for investors, with each rating accompanied by a qualitative assessment and detailed rationale.
3.4    Reporting Process
Reporting is one of the most critical stages of the SLB assessment methodology and begins with the systematic consolidation of analytical and scoring outputs. Findings are presented separately across KPI quality, SPT ambition, the linkage between bond characteristics and sustainability targets, reporting transparency, and verification arrangements. For each criterion, the instrument’s strengths and areas for improvement are clearly articulated. Finally, the draft report is submitted to the SPO Committee.
3.5    Committee Process
Following completion of the scoring process, the SPO Committee reviews the consistency of the final assessment, its alignment with the methodology, and the integrity of the analysis. The Committee is composed of members with expertise in sustainable finance, sustainability strategy, financial analysis, rating practices, and particularly KPI–SPT design. Where issuance-specific “grey areas” arise that are not fully captured by the methodology, the Committee also assesses these to ensure that the final SPO rating reflects not only the model output but also the intent and spirit of the methodology.
The Committee has the authority to override the SPO rating produced by the system in either an upward or downward direction. This authority is intended to balance limitations of a systematic model that may not capture every circumstance, and to ensure a fairer and more representative outcome by incorporating context-specific considerations. Key justifications for such interventions may include differences in KPI measurement infrastructure, SPTs that are excessively ambitious or insufficient relative to market norms, shortcomings in data quality, or recent structural changes affecting the issuer. 
4.    SPO ASSESSMENT CATEGORIES
In the sustainable finance market, a Second Party Opinion (SPO) is a critical process for assessing whether issued bonds align with defined sustainability criteria. As sustainability-linked bonds (SLBs) are structured to link financing terms to the achievement of performance targets, the SPO process evaluates the issuer’s alignment with international best practices in terms of strategic ambition, transparency, credibility, and impact-related disclosure.
Within the scope of an SLB SPO assessment, issuances are reviewed comprehensively against the criteria defined under five main categories and their respective sub-categories. At the end of the process, an overall view is formed on the extent to which the instrument is aligned with internationally recognized sustainability principles and on how effectively the SLB structure supports the reliable communication of environmental and social contributions to investors.
The figure below presents the main categories and sub-categories considered within the SPO assessment framework.
Figure 2: SPO Assessment Categories
  
4.1    Key Performance Indicators (KPIs)
Within a sustainability-linked bond (SLB) structure, Key Performance Indicators (KPIs) enable the issuer to track its strategic sustainability objectives in a tangible and measurable manner. Unlike use-of-proceeds instruments, these indicators measure progress in the issuer’s environmental and/or social performance at the entity level, rather than the allocation of proceeds to specific projects. KPIs may be defined across a wide range of themes, including climate change mitigation, energy efficiency, renewable energy use, reductions in carbon intensity, female employment ratios, occupational health and safety performance, or human rights practices within the supply chain.
•    Materiality of KPIs
In SLBs, KPIs should represent environmental and/or social topics that are materially relevant to the issuer’s sector and operating model. They should be aligned with national and international reference frameworks (e.g., SASB, SDGs, GRI), clearly linked to the issuer’s ESG strategic objectives, and supported by a transparent explanation of how and why they were selected. The scope and boundaries of each KPI should be clearly defined, calculation methodologies should be explicitly disclosed, and -where feasible- KPIs should be anchored in scientific or industry standards and supported by relevant reference values or benchmarks.
•    Measurability and Transparency
KPIs are expected to be defined in a clear, quantitative, and objective manner. Historical data should be made available in an accessible format, and external reference points that enhance comparability should be used where relevant. This strengthens the credibility, transparency, and investor traceability of the selected indicators.
•    Trackability and Reporting Readiness
KPIs should be designed to allow for regular monitoring and reporting, with transparent disclosure of the underlying methodology, measurement frequency, and data sources. Where possible, the use of digital or data-driven systems and consistent use of the same metrics in prior reporting cycles further strengthens reporting reliability and alignment with market standards.
•    Issuer ESG Track Record and Compliance Risk
Consideration is given to whether the issuer’s past environmental or social controversies may undermine the credibility of the SLB, the extent to which ESG management capacity is institutionalized, and whether the issuer discloses ESG performance regularly through independent indices or platforms. The presence of corrective actions addressing prior shortcomings, as well as the consistency and continuity between historical ESG performance and the targets committed under the SLB, are treated as critical factors in assessing issuer credibility.
4.2    Sustainability Performance Targets (SPTs)
In sustainability-linked bonds (SLBs), the performance targets defined for each KPI are among the most critical building blocks for demonstrating the issuer’s environmental and/or social contribution in a concrete manner. It is essential that the targets are ambitious, measurable, aligned with sector dynamics, and embedded within the issuer’s long-term sustainability strategy. Accordingly, the assessment focuses on whether the selected SPTs are designed to be realistic while still capable of delivering a genuinely transformative effect.
•    Level of Ambition
The assessment considers whether the SPTs are sufficiently ambitious and transformative by benchmarking them against the issuer’s historical performance, sector averages, and applicable regulatory requirements. Targets are expected to represent a meaningful degree of difficulty relative to a “business-as-usual” trajectory, while remaining achievable in light of the issuer’s resources and operational capacity.
•    Consistency and Reference Frameworks
This component evaluates the extent to which the SPTs align with internationally recognized agreements and initiatives (e.g., the Paris Agreement, SBTi, net-zero commitments, UN SDGs). The target definition, baseline year, methodology, and target level should be disclosed clearly, and the accuracy and selection rationale of any reference values used should be presented transparently.
•    Traceability and Validity
To ensure credibility, SPTs should be supported by robust measurement metrics, internal control mechanisms, and regular reporting arrangements. Public annual disclosure of progress is expected, together with binding provisions that preserve the validity of targets even under exceptional circumstances. The availability of at least three years of historical performance data, alongside forward-looking projections, is also considered critical for transparency and accountability.
4.3    Link Between Bond Characteristics and Targets
In sustainability-linked bonds (SLBs), the relationship between the instrument’s financial structure and the defined performance targets is a critical element. The alignment between bond terms, investor incentives, and the mechanisms triggered by the achievement (or non-achievement) of performance targets ultimately determines the credibility and effectiveness of the instrument. Accordingly, the assessment examines the extent to which the targets are embedded into the bond’s financial characteristics and whether this linkage is established in a transparent, measurable, and accountable manner.
•    Financial Linkage Mechanism
The way in which the connection between performance targets and financial consequences is structured is a key determinant of investor confidence. Clearly defining mechanisms such as coupon step-ups or reductions that are triggered depending on whether targets are met reinforces both the deterrent effect and the overall credibility of the instrument.
•    Incentive and Deterrence Structure
Strengthening the binding nature of the targets may require the performance-linked mechanism to include not only financial consequences but also governance- or reporting-related triggers and sanctions. Establishing a structure that is clear, explicit, and easily understandable -at a magnitude that can be reflected in investors’ risk pricing- stands out as a core requirement for both transparency and market credibility.
•    Implementation Clarity and Resilience
The assessment considers whether the performance-linked structure is supported by clear and binding procedures that define how it will operate under special situations (e.g., mergers, asset disposals) and extraordinary scenarios. Such ex-ante clarity enhances reliability and reduces uncertainty about the instrument’s enforceability and real-world effectiveness.
4.4    Reporting
The reporting process is one of the most critical components for ensuring the transparency and credibility of sustainability-linked bonds (SLBs). Within this scope, progress against the defined Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) is monitored on a regular basis and disclosed to investors in a clear and accessible manner.
•    Periodic Reporting Commitment
Periodic reporting is a cornerstone of investor confidence and transparency in SLBs. Accordingly, the issuer is expected to commit to publishing at least an annual report covering progress against the selected KPIs and SPTs. In addition to environmental and social performance metrics, reports are also expected to disclose the financial implications of performance outcomes, including any bond feature adjustments triggered by target achievement or non-achievement.
•    Level of Data Disclosure
The level of disclosure is a key criterion that enables investors to access reliable information and assess the traceability of targets. Transparent and comparable publication of KPI values, SPT progress, and any developments related to the bond’s financial structure is essential. Disclosures should be sufficiently detailed to allow investors to evaluate the ambition level of the targets, and credibility is further strengthened when the reported data is supported by internal assurance processes and/or independent third-party verification.
•    Change Notification Procedures
Change notification procedures ensure that any revisions to KPIs and/or SPTs are managed in a manner that preserves transparency and investor trust. It is critical that the conditions and rationale for any changes are clearly defined and that investors are informed in advance about the potential implications for performance measurement and any related coupon or structural features of the bond.
4.5    Verification
Verification refers to the independent assessment of whether the declared framework and performance disclosures in sustainability-linked bonds align with internationally recognized principles and standards. This process enhances the credibility of the instrument and supports investors’ access to accurate and transparent information. Through independent verification, it can be confirmed whether the issuer’s targets and commitments are consistent, whether reporting is coherent over time, and whether impact and performance assessments are reliable.
•    Commitment to Independent Verification
A commitment to independent verification involves having the defined Sustainability Performance Targets (SPTs) and Key Performance Indicators (KPIs) reviewed at regular intervals by qualified third-party experts. Such verification -typically conducted at least annually- should be carried out in line with ICMA guidance and/or other internationally recognized ESG standards, thereby reinforcing transparency and trust. 
•    Frequency of Verification
Verification frequency plays a critical role in ensuring the credible tracking of sustainability performance and meeting investor expectations. While annual verification is generally considered the baseline, transparency is further strengthened when additional checks are performed in periods when target achievement is assessed or expected to be confirmed. 
•    Qualifications of the Verifier
The verifier should demonstrate proven expertise across environmental and social domains to ensure the robustness of the assurance process. Minimizing conflicts of interest and safeguarding independence are essential to investor confidence. In addition, the verifier’s track record and the transparency of the methodology applied strengthen the impartiality of the conclusions and their acceptance by the market.