Sustainability-linked bonds: the next frontier in sovereign financing

Abstract

Recent decades have witnessed a growing awareness around the globe of the dangers posed by a single-minded focus on economic development, without considering its effects on the environment and on the needs and well-being of populations. In response, the international community has gradually developed the concept of ‘sustainable’ development, which attempts to reconcile and marry three separate objectives: economic development, environmental protection and social development.1 In the same manner that global finance played a key role in facilitating economic development during the second half of the twentieth century, sovereigns and private sector actors have, since the turn of the century, been increasingly turning to the global debt markets to finance sustainable development efforts. These trends have accelerated in recent years, and today no conversation about bond markets is complete without a discussion of ‘green’, ‘social’ and ‘sustainable’, or GSS, bonds. Initially, GSS bonds were mostly of the ‘green’...

Source: resolved