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Company & Organisation News - Sustainability Focus - 15/12/2020

Sustainability-Linked Bonds: A new chapter in sustainable finance

To watch V.E’s Head of Sustainable Finance Services, Benjamin Cliquet, discuss Sustainability-Linked Bonds in our new Ask an Expert video series, click HERE.

What are Sustainability Linked Bonds?

Sustainability-Linked Bonds (SLBs) are defined as “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.

  • SLBs are a complementary financing instrument to traditional green, social and sustainable bonds that provide flexibility on the use of proceeds.
    • While the latter are needed to guide investments towards projects demonstrating environmental and social benefits, SLBs offer a more dynamic vision of sustainability. They require issuers to define and commit to a sustainability path over a period of years through the selection of one or several KPIs or an ESG assessment.
    • SLBs are open to issuers across all sectors, and therefore are expected to play a key role for companies looking to transition their business models towards more sustainable pathways.
    • In June 2020, the ICMA released the Sustainability-Linked Bond Principles (SLBPs) to guide market participants in structuring this new type of sustainable finance instrument.
  • SLBs are less time-consuming for issuers to structure than green, social and sustainable bonds.
    • The main sustainability components of an SLB that an issuer needs to define are sustainability targets (at corporate level) on one or more environmental/social issues. These targets may even be those already set within the issuer’s sustainability strategy.
    • As for all other ICMA and LMA standards, V.E offers Second-Party Opinions services (SPOs) for SLBs that assesses their alignment with the SLBPs.
      • Our SPOs are structured around two core components: the KPIs relevance and the targets’ ambition.
      • V.E has already delivered SPOs on the following SLB Frameworks: Chanel, Enel, Etihad Airways, Schneider Electric, Albioma, and NRG.

 

To watch V.E’s Head of Sustainable Finance Services, Benjamin Cliquet, discuss Sustainability-Linked Bonds in our new Ask an Expert video series, click HERE.

For more information on Sustainability-Linked Bonds, please contact our Sustainable Finance Team: VEsustainablefinance@vigeo-eiris.com

 

About V.E

V.E is a global leader in ESG assessments, data, research, benchmarks and analytics. Leveraging our extensive proprietary database, we equip market players with the ESG insight they need to manage risks and better understand and address their social and environmental impact. Since 2019, V.E has been an Affiliate of Moody’s Corporation. V.E has an industry unique ISO 9001: 2015 quality certification for its processes relating to methodology, assessments, sale and delivery of its data to all types of investors and issuers. V.E is a Climate Bonds Initiative Verified Provider of Second Party Opinions. With a team of nearly 300 experts of 30 different nationalities, V.E is present in Paris, London, Brussels, Casablanca, Hong Kong, Milan, New York, Rabat and Santiago.

For more information about V.E: vigeo-eiris.com

For more information about Moody’s ESG Solutions: moodys.com/esg

Keywords : ESG, SPO, Sustainability Link Loan, Sustainability-Linked Bonds