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Green and Social Together: Nudging sustainability bonds in the right direction


Sustainability bonds are the newest trend to watch in the labelled bond market. In 2018, sustainability bonds and sustainability-linked loans reached record levels. But are sustainability bonds the best financing solution for achieving Sustainable Development Goals? Or are they an opportunity for issuers to selectively align to only the SDGs that suit them, for example considering only specific social aims while causing negative environmental impacts, or vice versa?

Sustainability Bond Frameworks contain green and social project categories. To do justice to the SDGs, green projects should comply with widely accepted social standards and contribute to social cohesion, while social projects should meet environmental standards and not oppose key environmental objectives such as climate change mitigation and adaptation. An integrated approach distinguishes Sustainability Bonds from other financial instruments and justifies its space in the bond market. The emergence of Sustainability Bonds should encourage issuers to find synergies and efficiency gains between social and environmental objectives and demonstrate to the market their capabilities and their ambition to identify and finance sustainable projects, cope with potential trade-offs and measure the impacts.

CICERO and IISD jointly provide Second Opinions for Green and Sustainability Bond Frameworks. In this article we report about our experience in this space, our transparent and integrated assessment approach for providing Second Opinions and our recent Second Opinion for the Green and Sustainability Bond Framework of the Agricultural and Development Bank of China.