SUSTAINABILITY-LINKED BONDS: Building a High-Quality Market

The report analyzes the sustainability-linked bond (SLB) market, finding that while it is diversifying, a high share of deals lack ambition and credibility. Key issues include partial GHG scope coverage, a lack of science-based targets, and poor post-issuance reporting. The report introduces the Climate Bonds SLB Database (SLBDB) to identify aligned deals and provides a best-practice checklist for issuers, emphasizing the need for material KPIs, transparent transition plans, and robust financial penalties.

• The SLB market is growing and diversifying, with a cumulative USD279bn issued across 768 bonds from 469 issuers as of November 2023. Non-financial corporates represent 84% of the cumulative amount, while sovereign issuance began in 2022 with Chile and Uruguay.
• A significant portion of the SLB market lacks alignment with the Climate Bonds SLBDB Methodology; only 14% of total SLBs (17% by amount) are aligned. The primary reasons for non-alignment are a lack of GHG targets and partial GHG scope coverage.
• Partial coverage of GHG scopes in targets is identified as a leading source of greenwashing. Seven of the top ten issuers have most or all SLBs linked to targets that exclude scope 3 emissions, despite these being the largest source of GHG emissions in their sectors.
• 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.
• KPI performance is heterogeneous; 31% of sampled SLBs and 34% of the amount issued have all KPIs off track. There is a moderate inverse relationship between setting science-based targets and being on track to meet them.
• Post-issuance reporting quality varies widely among the top 50 issuers. Common failures include a lack of quantitative explanations for performance changes, unclear data restatements, and inconsistencies between SLB documents and corporate-level reports.
• Transition plan disclosure among the top 50 issuers shows a wide range of quality, with scores between 0 and 27 points (average 17.4). Latin American issuers achieved the highest average score (18.65) and the narrowest range.
• There is a strong positive correlation between SLB issuance and the quality of a company's environmental disclosure, with 67% of sampled issuers scoring A or A- in CDP's latest climate questionnaire.
• Climate mitigation KPIs dominate the market, achieving over 50% share in almost every sector. However, KPIs related to climate adaptation and biodiversity are very rare, even in sectors where they are highly material.

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} }