Commentary Response to Bloomberg article 'The $280 Billion Climate Bond Market That Isn’t Working'

Presenting the shortcomings of sustainability-linked bond (SLB) markets, the recent Bloomberg article 'A $280 Billion Climate Bond Market That Isn’t Working' argues that “the sustainability credentials of many SLBs have been weak,” and that there is a “high proportion of low-quality deals that lack adequate disclosure, ambition and credibility.”

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We believe it is important to draw a clear distinction between the corporate and existing sovereign SLBs (Chile and Uruguay), which can be considered cases of good practice on various accounts, including pre-issuance disclosures and communication with the investors, material KPI selection and ambitious target setting, verification, and post-issuance transparency and reporting.

Using corporate examples, the Bloomberg article also points to loopholes in SLB legal documentation that can undermine credibility, specifically:

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• clause to exempt the issuer from paying the penalty if they miss KPI targets due to change to rules or policy,
• clause to enable issuers to exclude post-issuance acquisitions and certain investments from their performance evaluation.


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The two loopholes mentioned in the article do not apply to the sovereign SLBs we have seen to date. The sovereigns' KPIs are indeed tied to their underlying policies and international commitments on climate and nature (in the existing cases, NDCs). Given the importance of increasing the number of high-quality SLB issuances, it is key to highlight the quite different experience between corporate and sovereign SLB issuances, as sovereign SLBs have to date set many positive examples that the corporate sector can and should seek to replicate.

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For these reasons, it is critical to clearly differentiate between the track record of sustainability credentials and quality control of the two sub-asset classes - the sovereign and the corporate SLBs - within the existing SLB market.

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If you are interested in discussing further, please reach out to: Gregor Pipan, Program Manager, SSDH and Sovereign Finance at gregor.pipan@naturefinance.net; Barbara Oldani, Stakeholder Engagement Lead at barbara.oldani@naturefinance.net or ssdh@naturefinance.net