Sustainability is increasingly becoming a priority, for investors and companies alike. With the rise in financing options available on the capital markets to fund environmental, social, and governance (ESG)-supportive growth, corporates around the world have access to a broader toolbox than ever before to align with Sustainable Development Goals.
Speaking to Investments & Pensions Europe (IPE), Noemie de la Gorce, associate director, sustainable finance at S&P Global Ratings says that new instruments – such as sustainability-linked bonds – can help investors “diversify their contribution to sustainability objectives.”
While tied to different incentive mechanisms, some investors may see these instruments as having the potential to be stronger drivers of change than green bonds – since vehicles like sustainability-linked bonds can give companies financial incentives to advance their sustainability agenda, by linking the cost of funding to specific sustainability objectives.
“Some investors see sustainability-linked bonds as more powerful than green bonds in embedding sustainability into a company’s strategy, because the environmental and social objectives apply to the whole company, instead of a specific transaction,” says de la Gorce.
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