‘Sustainability’ means meeting our present needs without compromising future generations to meet theirs. With that in mind, learn what Sustainable Bonds are.
Beyond green
Sustainable Bonds include green, social and sustainability bonds. While proceeds from green bonds further environmental sustainability, social bonds help with gender equality, food, education, and other programmes that promote positive social outcomes. Sustainability bonds are a hybrid of green and social bonds.
Growing diversity
While Supranationals have been key issuers of Social Bonds, government agencies, private companies and financial institutions are expected to become more active 1. Issuance is also growing in Emerging Markets, although Europe currently has the largest share2.
Similar yet distinct
While proceeds from green, social and sustainability bonds are committed to Environmental, Social and Governance (ESG) purposes, each category is distinct. Each bond is classified to the primary goal of the underlying project.
An evolving framework
There are guidelines3, which are likely to evolve, that help promote transparency and integrity of the market. Investors, however, need to remain vigilant against issuers that misrepresent the environmental (“greenwashing”) or social impact (“social washing”) of their projects.
Sources:
1 S&P Global Ratings. A Pandemic-Driven Surge In Social Bond Issuance Shows The Sustainable Debt Market Is Evolving.
2 Year to date through May 31, 2020. Source: Bloomberg.
3 Green Bond Principles. Voluntary Process Guidelines for Issuing Green Bonds - June 2018. Social Bond Principles. Voluntary Process Guidelines for Issuing Social Bonds - June 2020. Sustainability Bond Guidelines – June 2018. These guidelines help govern the usage, management and reporting of the proceeds, as well as project selection.