Green, Social, and Sustainability-linked Bonds
A new era for sustainable bonds
With the adoption of the new EU Green Bond Standard (EU GBS), Europe is at the forefront of promoting sustainable finance. Sustainable bonds, including green, social, sustainability, and sustainability-linked bonds, play a crucial role in financing projects with positive environmental and social impacts.
The EU GBS sets a new standard by making external reviews mandatory for issuers of sustainable bonds, ensuring transparency and credibility in the market.
Explore how PwC is supporting sustainable bonds, including EU Green bonds and driving the evolution of sustainable finance in Europe.
Green Bonds are defined by international standards such as the International Capital Market Association’s (ICMAs) Principles and related guidance or the Climate Bonds Initiative. The common aspect embedded into these is the use of proceeds, meaning how the bond proceeds are allocated towards projects that bring environmental and climate benefits.
The European Commission has defined EU Green Bonds (“EU GBS”) as any type of listed or unlisted bond or capital market debt instrument whose proceeds shall be used to finance green projects meeting the environmental objectives as defined in the EU Taxonomy.
Social bonds are bond instruments where the proceeds will be used to finance eligible social projects, which are aligned with the four core components of the Social Bond Principles, as defined by the International Capital Markets Association.
Sustainability bonds are bonds where the proceeds will be used to finance a combination of both green and social projects.
Sustainability-linked bonds are any type of bond instrument for which the financial and/or structural characteristics (typically their interest coupon) can vary depending on whether the issuer achieves its sustainability/ESG objectives.
Unlike green, social or sustainability bonds, sustainability-linked bonds are not focused on how the proceeds of the bond are used. Instead, they focus on whether or not the issuer meets their sustainability/ESG targets.
How can PwC help?
- Assessing the issuer’s readiness to issue public or private debt with a sustainability focus, including an analysis of the issuer's capital structure and sustainability strategy
- Determining the most suitable bond type and identifying the appropriate market for issuance
- Providing support in the selection of sustainability KPIs for the bond framework
- Providing assistance in drafting a sustainability bond framework
- Developing internal project selection criteria and process to identify eligible projects, including setting up a taxonomy-alignment assessment process
- Defining financial and sustainability-related information required for meeting the relevant prospectus requirements and marketing purposes
- Optimising the issuer’s financial and sustainability-related ESG reporting process to ensure continuous compliance with both current and future reporting requirements
- Establishing data models for financial and sustainable ESG data to support meeting due diligence requirements from banks and other transaction parties
- Developing measurement and reporting frameworks, along with key performance indicators (KPIs) to demonstrate sustainable impact
- Assisting with the development of investor marketing materials
- Collaborating with legal counsel in drafting the information memorandum, prospectus and loan agreements, ensuring all the information required by investors and other stakeholders is disclosed
