Sustainability-linked bonds provide issuers with much leeway for the use of proceeds and market participants are getting a better understanding of their risks and rewards, as well as how they can be “gamed”. Green-washing is only one of several risks looming.
Thematic and sustainability-related bonds are attracting increasing interest from issuers. For the market to continue to develop, a clear understanding of the challenges and, of course, the opportunities they present is important.
SLBs are new type of ESG-friendly bonds with variable coupons tied to sustainability targets. As opposed to green, social or sustainable bonds, issuance proceeds are not tied to specific green or social projects or assets; the focus is on the company’s ability to meet its commitments.
Mezzanine instruments fit right between traditional senior secured debt and old-fashioned equity, both in terms of risk and returns. If structured properly, they may do wonders for companies, especially those struggling to secure financing in the current economic context.
Equities have traditionally dominated the market for ESG investing, but green, social and sustainable bonds, commonly called thematic bonds, are the hot new thing. Latin America and the Caribbean is uniquely positioned to benefit from this new type of investment.
Blue bonds are emerging as a new asset class that helps to solve water-related challenges, create sustainable ocean business opportunities, and signal responsible ocean stewardship. An IDB Invest and UN Global Compact report looks into this unique way to mobilize capital.