In this briefing, we take a look at sustainability-linked bonds (“SLBs”), which have fast become an important feature of the sustainable finance market. According to Climate Bonds Initiative, SLB issuance reached US$76.3 billion in 2022 and we have seen an increasingly wide variety of corporate and sovereign issuers take advantage of the structure.
However, the market has not grown without incident or controversy. Some issuances have attracted accusations of “greenwashing” for a lack of ambition in their targets, the lack of meaningful consequences if a target is not met or where the structure of the SLB does not address the true sustainability challenges of an issuer’s business. SLBs carry with them some particular considerations that should be kept in mind when structuring a transaction and preparing the relevant legal documents and marketing materials.
We take a look at some of these key points in this note.
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