Sustainable bonds and loans

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Definition

Sustainable bonds or loans are bond issues in which the issuer commits to use the proceeds of the bond issue to finance environmental or social projects. A sustainable bond has the same financial and contractual terms as any other senior unsecured transaction (conventional bond). However, when issuing a sustainable bond, the issuer makes the following commitments:

allocate the proceeds of the bonds to environmental and/or social projects or expenditures, defined according to a predefined set of eligibility criteria,
provide investors with a report on the projects that have been funded using the proceeds of the sustainable bond.

Green categories

Social categories

Renewable energy
Green Buildings
Low Carbon Transportation
Water management and treatment
Pollution prevention and control
Circular economy

Job creation and preservation through SME financing
Socio-economic advancement and empowerment
Affordable housing
Access to education and vocational training
Access to health care

Difference with green bonds or social bonds

In a green bond issue, the financing is allocated to an environmental project, in a social bond, the financing is allocated to a social project. In the case of a sustainable bond, the amount raised can be allocated to either one or the other.

Sustainable bonds and sustainability-linked bonds

Sustainable bonds should not be confused with sustainability-linked bonds! In a Sustainability-Linked Bond, the use of funds is not constrained, and the performance of the security is linked to the performance of the issuer in relation to sustainable development indicators.