Is Sustainability-Linked & Transition Financing Fit for Purpose?

A new Climate Bonds discussion paper provides an overview of common characteristics to define a transition and sustainability-linked financing standardsThe discussion paper excludes consideration of how performance-linked financing affects incentives, which we review using a social sustainability-linked financing exampleThe incentive problems in sustainability-linked financing such as what is used to finance transition may benefit from solutions developed for Islamic finance

The Climate Bonds Initiative has released a discussion paper covering the items that would be needed to create credible transition bond standards. Many of the elements are simple and realistic, and incorporate aspects from other emerging principles that have guided the development of ‘transition’ and ‘sustainability-...