Sustainability Bonds are fixed-income financial instruments ( bonds) where the proceeds will be exclusively used to finance or re-finance a combination of Green and Social Projects and which are aligned with the four core components of the

International Capital Market Association The International Capital Market Association or ICMA is a not-for-profit global trade association A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization found ...

(ICMA) Green Bonds Principles and Social Bonds principles. The main difference among

green Green is the color between cyan and yellow on the visible spectrum. It is evoked by light which has a dominant wavelength of roughly 495570 nm. In subtractive color systems, used in painting and color printing, it is created by a com ...

social Social organisms, including human(s), live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary or not. Etymology The word "social" derives fro ...

and sustainability bonds, lies in their sustainable categories for the allocation of proceeds, sustainability bonds needing to combine both social and green categories.

The principles (ICMA)

ICMA principles are currently the most commonly accepted framework for green, social and sustainability bonds’ issuance. They are coordinated by ICMA, which provides not only administrative support but also guidance for their governance process. The four core components of the principles are: # Use of proceeds: Identify the set of green and social sustainable categories or list of projects and assets to be financed by the proceeds from the bond issuance. # Process for project evaluation and selection: The process for selecting and evaluating eligible green and social projects using selection criteria identified by the issuer. # Management of proceeds: Define the process for tracking, allocating and spending the proceeds of the bond. # Reporting: Determines ‘what’ and ‘how often’ issuers have to disclose information to investors. The proceeds of Sustainability Bonds need to be applied in both the Green project and Social project categories. Green project categories suggested by the principles include: * Energy * Buildings * Transport * Water management * Waste management & pollution control * Nature-based assets including land use, agriculture and forestry * Industry & energy-intensive commercial * Information technology & communications (ICT) Social Project categories suggested by the principles include: * Affordable basic infrastructure * Access to essential services * Affordable housing * Employment *

Food security Food security is the state of having reliable access to a sufficient quantity of affordable, healthy Human food, food. The availability of food for people of any class, gender, ethnicity, or religion is another element of food protection. Simila ...

and sustainable food systems * Socioeconomic advancement and empowerment Other international standards and frameworks examples are the International Climate Bonds Standards and the

ASEAN The Association of Southeast Asian Nations, commonly abbreviated as ASEAN, is a regional grouping of 10 states in Southeast Asia "that aims to promote economic and security cooperation among its ten members." Together, its member states r ...

standards.

Criticism and controversies

Several authors and studies have raised concerns about the risk of

greenwashing Greenwashing (a compound word modeled on "whitewash"), also called green sheen, is a form of advertising or marketing spin that deceptively uses green PR and green marketing to persuade the public that an organization's products, goals, or ...

, when revenues are not systematically applied to activities with positive environmental outcomes. Further indicating that this risk is accentuated by the lack of a clear and unique definition of what makes a bond "sustainable". Another criticism is that most of the public and private sector players are more still concerned about the revenue-generating aspects and mainly using the ‘sustainability’ label as a

competitive advantage In business, a competitive advantage is an attribute that allows an organization to outperform its competitors. A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skille ...

in the business A new category of bonds known as sustainability-linked bonds (SLB), tries to overcome these problems by penalizing the issuer with a step-up coupon in case of failing its sustainability performance target(s).

References

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External links

Sustainability Bonds
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Massachusetts Bay Transportation Authority The Massachusetts Bay Transportation Authority (abbreviated MBTA and known colloquially as "the T") is the public agency responsible for operating most public transportation services in Greater Boston, Massachusetts. The MBTA transit network in ...

- first non-profit sustainability bonds in the U.S. Bonds (finance)

The principles (ICMA)

Criticism and controversies

See also

References

External links