Clifford Chance

Sustainability-Linked Bonds - Making Sense of SLBs, KPIs and SPTs

23 June 2020

On 9 June, the International Capital Market Association (ICMA) published the Sustainability-Linked Bond Principles (the Principles), a set of voluntary guidelines aimed at fostering the development of a sustainability-linked bond (SLB) market.

SLBs are "any type of bond instrument for which the financial and/or structural characteristics can vary depending on whether the issuer achieves predefined sustainability/ ESG objectives" – the typical example would be a change in interest rate depending on whether a target sustainability key performance indicator (KPI) is met.

We take a look at the basics of the Principles and how they might be used. In addition, we discuss some of the points issuers and underwriters should consider when bringing this product to market.

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