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Questions and Answers
What was the total volume of Sustainability-Linked Loans (SLL) in 2019?
According to Moody's, what is the forecasted issuance of green bonds in 2021?
What was the total issuance of green bonds in 2020?
Which type of bond has seen a significant upsurge in issuance due to the COVID-19 pandemic?
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What is the main difference between Sustainability-Linked Bonds and Green Bonds?
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What is the main driver of the growth of sustainable bonds, according to the text?
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What is a key characteristic of Sustainability-Linked Bonds (SLBs)?
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What is the primary goal of Sustainability-Linked Bonds in terms of the issuer's performance?
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What is a key aspect of ESG objectives in the context of Sustainability-Linked Bonds?
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What is a characteristic of green bond funds?
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What is the significance of Key Performance Indicators (KPIs) in the context of Sustainability-Linked Bonds?
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What is the approximate value of assets in sustainable ETFs as of April 2021?
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What is a key feature of the EUR 1 billion loan taken by DSM in 2018?
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What is the primary goal of Chanel's EUR 600 million sustainability-linked bond issued in 2020?
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What is the purpose of a sustainability-linked loan, as exemplified by DSM's loan in 2018?
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What is a key difference between a sustainability-linked bond and a green bond?
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What is the role of the banking syndicate in Volution's GBP 150 million loan facility?
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What is the benefit of sustainability-linked bonds and loans for companies?
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What is the primary driver behind the growth of sustainability bonds in the market?
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What is the projected total issuance of green bonds, social bonds, and sustainability bonds in 2021 according to Moody's forecast?
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Which type of bond has seen a more mature growth compared to Sustainability-Linked Bonds?
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What is the approximate total issuance of green bonds in 2020?
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What is the significance of the year 2019 in the context of Sustainability-Linked Loans (SLL)?
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Which of the following factors contributed to the growth of social and sustainability bonds in 2020?
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What is the primary purpose of aligning loan terms to a borrower's performance against predefined sustainability/ESG objectives?
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What is a characteristic of sustainable ETFs that consist of shares of companies that engage in sustainable activities?
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What is the primary goal of Sustainability-Linked Bonds in terms of the issuer's Key Performance Indicators (KPIs)?
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What is the main difference between green bonds and Sustainability-Linked Bonds?
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What is the primary benefit of Sustainability-Linked Bonds for companies?
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What is the significance of a predefined timeline in the context of Sustainability-Linked Bonds?
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What is the primary focus of sustainability-linked loans in terms of achieving sustainability outcomes?
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What is the common thread among the Bond Principles, Green Bond Principles, and Sustainability-Linked Loan Principles?
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What is the main distinction between sustainability-linked bonds and green bonds?
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What is the primary goal of the coordination efforts among the Sustainability-Linked Loan Principles, Bond Principles, and Green Bond Principles?
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What is the primary benefit of sustainability-linked bonds and loans for borrowers?
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What is the core component of the Sustainability-Linked Bond Principles (SLBP) that relates to the borrower's sustainability performance?
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Study Notes
Sustainability-Linked Bonds and Loans
- The Sustainability-Linked Bond Principles were launched in 2019 and set guidelines for the market, with USD 90 billion in volume that year.
- Green bond issuance has grown significantly, reaching USD 270 billion in 2020.
- Social and sustainability bonds have also grown quickly in issuance, although with a later start and from a lower baseline.
Growth of Sustainable Bonds
- In 2020, the world was hit with the COVID-19 pandemic, and many institutions wanted to raise money to help address its impacts, leading to a particularly large upsurge in social and sustainability bond issuance.
- According to Moody's, this trend is set to continue in 2021, with forecast issuance of USD 375 billion in green bonds, USD 150 billion in social bonds, and USD 125 billion of sustainability bonds.
Examples of Sustainability-Linked Deals
- DSM, a Dutch health, nutrition, and materials company, took out a EUR 1 billion revolving credit facility with a group of 15 banks linked to its greenhouse gas (GHG) emissions.
- Chanel, the famous French fashion company, issued a sustainability-linked bond in 2020 in two parts, tied to cutting its corporate GHG emissions in half by 2030 and reducing supply chain emissions by 10%.
- Volution, a British ventilation systems manufacturer, agreed a GBP 150 million sustainability-linked revolving credit facility.
Sustainability-Linked Bond Principles
- Sustainability-Linked Bonds (“SLBs”) are any type of bond instrument for which the financial and/or structural characteristics can vary depending on whether the issuer achieves predefined Sustainability/ESG objectives.
- The Bond Principles have five core components:
- The issuer commits explicitly to future sustainability/ESG objectives.
- The bond's financial and/or structural characteristics vary depending on whether the issuer achieves the objectives.
- The objectives are relevant, core, and material to the issuer's overall business.
- The objectives are consistent with the issuer's overall strategic sustainability/ESG strategy.
- The objectives are determined on a predefined timeline.
Sustainability-Linked Loans
- Sustainability-linked loans incentivize the borrower's achievement of ambitious, predetermined sustainability performance objectives.
- The SLBP have five core components:
- The borrower commits to future sustainability/ESG objectives.
- The loan's financial and/or structural characteristics vary depending on whether the borrower achieves the objectives.
- The objectives are relevant, core, and material to the borrower's overall business.
- The objectives are consistent with the borrower's overall strategic sustainability/ESG strategy.
- The objectives are determined on a predefined timeline.
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