Investors should require companies issuing sustainability-linked bonds to have Paris-aligned targets, according to the Climate Bonds Initiative (CBI).
In a discussion paper exploring credible climate transition strategies, the influential non-profit identified five ‘hallmarks’ for issuers of sustainability-linked bonds (SLBs).
SLBs, which allow companies to borrow more cheaply for general corporate purposes if they meet certain ESG goals over the term of the bond, are one of the most divisive products in the market. While some argue they are key to encouraging entity-level ESG improvements - as opposed to green bonds, which focus on project-level sustainability - others believe the ESG targets being adopted by issuers of SLBs are often opaque and unambitious.
CBI claims the asset class has seen “shaky first examples” and will not grow to its full potential without “rules of the road”. Today, it called for companies to have robust decarbo…