Sustainability-Linked Bonds: A Promising Tool for Financing ESG Transformation

Despite the rapid growth of green and sustainable finance markets in recent years, efforts to support climate finance have largely focused on “pure green” and near-“pure green” activities, while support for the broader range of investments needed across the economy, including transition activities and investments by GHG-intensive sectors and companies, has been limited, with some sectors finding it increasingly difficult to do so. Effective transition finance policies can support this transition across the economy and improve the ability of sectors or companies to access finance to support their transition to zero emissions.

ESG (green bonds, social bonds, sustainability bonds, sustainability-linked bonds, or GSS+ bonds) finance instruments continue to evolve globally, with total annual global issuance reaching US$860-900 billion in 2022 according to various estimates1 . Meanwhile, the Climate Bonds Initiative estimates that the cumulative issuance of GSS+ bonds reached US$3.7 trillion by the end of 2022. Read more about this in the report.