Green Bond's Awkward Kid Brother (Sustainability-linked Bonds) Enters the Market

How they could help finance the transition of carbon-heavy companies, but only if the issuers are serious about climate.
Nov 10, 2021 8:15 AM ET

The Green Bond’s Awkward Kid Brother (Sustainability-linked Bonds) Enters the M…

by Kari Huus of US Green Bonds Review from Climate & Capital Media 

The green bond market is on fire, channeling record funds into climate-friendly projects around the globe — and at a relatively low cost to issuers. Green bonds offer a promising synergy between investors with trillions of dollars chasing ESG products and the need for climate finance, especially in developing countries where access to affordable debt is essential to install those solar arrays, wind turbines and other infrastructure to underpin a new green economy.

But there’s another piece of the puzzle: Can we also funnel money into the transition of carbon-intensive industries to support their transition to a clean economy, breaking the addiction to fossil fuels? In a perfect world, this is where a newer product, Sustainability-Linked Bonds (SLBs) could play a role.

SLBs are still very much a work in progress. So it’s fair to ask: When a global coal developer raises $300 million through an SLB, does it really help finance the transition, or just raise cheap capital to continue business as usual? More on that real-world example shortly, but first, some background... 

Read Kari's very informative article here