ESG Bonds

Overview

Global ESG bond scale is smaller than ESG securities. ESG bond investors pay more attention to whether the issuer can repay the borrowings, while ESG securities investors value the future growth ability of investees. In terms of engagement, ESG bonds do not have voting rights and have weaker impacts than securities.

Whether they are green bonds, sustainable bonds or sustainability-linked bonds, they must comply with the ESG framework in terms of classification, issuance and disclosure. The International Capital Market Association has proposed a variety of ESG bond standards, and various jurisdictions are also forming their standards.

ESG Bonds Classifications

There is no universal classification method for ESG bonds. Common ESG bonds include green bonds, social bonds, transition bonds, blue bonds, sustainable development bonds, and sustainable development linked bonds.

Green bonds have the highest proportion in ESG bonds, and common green bonds include Use of Proceeds bonds, Use of Proceeds Revenue bonds, project bonds, securitization bonds, etc.

ESG Bonds Regulations

The biggest feature of ESG bonds compared to conventional bonds is that the issuer needs to disclose the purpose of the funds for investors to determine whether the bonds meet greenwashing.

Global regulators are formulating policies for the fundraising, issuance, and information disclosure processes of ESG bonds, among which the EU green bond regulation is relatively mature.