Sustainability-Linked Bonds
Sustainability-Linked Bonds are versatile instruments that can support an issuer’s overall sustainability strategy. Sustainability-Linked Bonds differ from traditional Sustainable Bonds such as Green, Social and Sustainability Bonds in that the funds raised are used for general corporate purposes, and the terms of the instrument are linked to the achievement of pre-defined sustainability targets.
Many companies are unable to issue Green, Social or Sustainability Bonds as they cannot identify sufficient sustainable eligible assets. Sustainability-Linked Bonds help overcome this issue, and hence allow for a broader range of companies to participate in the sustainable debt markets.
Sustainability-Linked Bonds were first introduced in the capital markets in 2019. The new format gained legitimacy when the International Capital Market Association launched the Sustainability-Linked Bond Principles in June 2020. The aim of the launch was to further develop the market for performance-based instruments.
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