Sustainable bonds and loans

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What are sustainable bonds or loans?

Sustainable bonds and loans are financing instruments designed to support environmental and/or social objectives. They are structured like conventional debt instruments but include additional commitments on use of proceeds, eligibility criteria, transparency, reporting and, where relevant, external review.

A distinction should be made between bonds and loans. Sustainable bonds may be subject to specific rules depending on the jurisdiction and label used. In the European Union, the most structured framework applies to bonds using the European Green Bond or EuGB label, under Regulation (EU) 2023/2631. Sustainable loans are generally less prescriptively regulated; in the EU, the European Banking Authority has proposed a voluntary green loan label, but there is not yet a binding standard equivalent to the EuGB label.

EU sustainable finance is based on the EU Taxonomy, which defines environmentally sustainable activities through four criteria: substantial contribution to an environmental objective, “do no significant harm”, minimum safeguards and technical screening criteria.

Globally, sustainable does not have a single regulatory definition. The United States relies more on disclosure and investor protection, while Asia combines regional standards, national taxonomies and transition finance tools.

Examples of eligible categories

These categories are indicative and depend on the applicable framework.

Green categories

Social categories

Renewable energy
Energy efficiency
Green buildings
Clean or low-carbon transportation
Sustainable water management
Pollution prevention
Circular economy
Climate adaptation

Job creation and preservation
Socio-economic advancement
Affordable housing
Access to education
Access to healthcare
Access to essential services

Key distinctions

A green bond finances environmental projects; a social bond finances projects with positive social outcomes; and a sustainability bond can finance both. ASEAN standards, for example, define sustainability bonds as financing or refinancing a combination of green and social projects.

A sustainability-linked bond is different: its proceeds are not necessarily allocated to specific projects; instead, its financial or structural characteristics vary depending on whether predefined sustainability objectives are achieved.

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