Sustainability-Linked Bonds


Summary

This practice note covers how the Sustainability-Linked Bond Principles (SLBPs) can be used as voluntary guidelines to aid issuers in creating, and investors in evaluating, sustainability-linked bonds (SLBs). SLBs are one of four environmental, sustainable, and governmental (ESG)-driven debt products currently available in the marketplace. The proceeds of a sustainability-linked bond issuance can be used for any corporate purpose, but within the parameters of the bond's documentation a goal and reward mechanism exists whereby attainment of a sustainability benchmark results in some financial or structural variation—most often, a change in the coupon rate—of the bond's terms. Despite the significant volume of SLBs issued—in 2022, over $76 billion in SLBs were sold—there is no mandatory or globally required disclosure or transparency regulation governing these debt instruments. The SLBPs outline five core components that, when followed, can promote transparency and disclosure of ...