SUSTAINABILITY-LINKED BONDS: Building a High-Quality Market

This report by the Climate Bonds Initiative analyzes the sustainability-linked bond (SLB) market up to November 2023, identifying a high prevalence of low-quality deals characterized by a lack of ambition, poor disclosure, and weak underlying transition plans. The report provides a quantitative profile of the market, assesses KPI performance and transition plan quality among top issuers, and offers a best-practice checklist to improve market credibility and scale.

• The SLB market is nascent and diversifying, with a cumulative USD279bn issued across 768 bonds from 469 issuers as of November 2023. Non-financial corporates dominate the market, accounting for 84% of the cumulative amount, while Italy, France, and Germany are the top issuer domiciles by amount.
• A significant majority of SLBs lack alignment with the Climate Bonds SLBDB Methodology, with only 14% of total bonds (17% by amount) meeting the requirements. The primary reasons for non-alignment are a lack of greenhouse gas (GHG) targets and partial GHG scope coverage, particularly the exclusion of material scope 3 emissions.
• Coupon step-ups are the dominant financial mechanism, appearing in 58% of SLBs and 77% of the amount issued, with an average step-up of 24.8 basis points per target. Redemption premiums are the second most popular mechanism, while pure step-downs are rare.
• KPI performance is heterogeneous, with 31% of sampled SLBs and 34% of the amount issued having all KPIs 'off track'. There is a moderate inverse relationship between setting science-based targets and being on track to meet them, as aligned bonds show a higher share of 'off track' results.
• Post-issuance reporting quality varies widely among the top 50 issuers. Common deficiencies include a failure to explain the reasons for performance changes, lack of clarity regarding data restatements (especially for GHG emissions), and inconsistencies between SLB documents and corporate-level reports.
• Transition plan disclosure among top issuers shows a wide range of quality, with scores between 0 and 27 out of 35 points. There is a strong positive correlation between SLB issuance and the quality of environmental disclosure, with 67% of sampled issuers scoring A or A- in CDP's climate questionnaire.
• Regional analysis of transition plans indicates that Latin American issuers achieved the highest average score (18.65) and the narrowest range, while Europe had the widest range of quality. North American issuance is noted as a priority for growth due to its low share of the total market.
• The report recommends several best practices for high-quality SLB issuance, including the use of multiple KPIs covering material impacts, setting target and trigger dates well before bond maturity, and ensuring call dates occur after the first target date to prevent issuers from avoiding penalties.
• Public sector issuance is growing, with Chile and Uruguay becoming the first sovereign SLB issuers in 2022. Additionally, the Development Bank of Rwanda issued the first SLB from East Africa and the first globally from a national development bank in October 2023.

APA

Almeida, M. (2024). SUSTAINABILITY-LINKED BONDS: Building a High-Quality Market. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Sustainability-Linked-Bonds-Building-a-High-Quality-Market.pdf

Chicago

Almeida, Miguel. SUSTAINABILITY-LINKED BONDS: Building a High-Quality Market. Climate Bonds Initiative, 2024. https://www.climatebonds.net/files/documents/publications/Sustainability-Linked-Bonds-Building-a-High-Quality-Market.pdf.

Wikipedia

{{cite report |last1=Almeida |first1=Miguel |title=SUSTAINABILITY-LINKED BONDS: Building a High-Quality Market |publisher=Climate Bonds Initiative |date=March 2024 |url=https://www.climatebonds.net/files/documents/publications/Sustainability-Linked-Bonds-Building-a-High-Quality-Market.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{almeida2024sustainabilitylinked, author = {Almeida, Miguel}, title = {{SUSTAINABILITY-LINKED BONDS: Building a High-Quality Market}}, institution = {Climate Bonds Initiative}, year = {2024}, month = mar, url = {https://www.climatebonds.net/files/documents/publications/Sustainability-Linked-Bonds-Building-a-High-Quality-Market.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }