Sustainable bonds and loans
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.
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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.