ESG bonds and their use cases explained

Interest in ESG bonds has been steadily growing but what exactly are they and why are they being bought and sold?

Since the European Investment Bank issued the first ESG bond in 2007, many companies and businesses have followed suit by producing their own.

The term ESG bonds stands for Environmental, Social and Governance bonds. They are categorised as green, social, sustainability and sustainability-linked depending on their end goal. The first three are loans to fund specific projects, the latter are used to attain a company’s sustainability targets.

Today, ESG bonds account for 10% of all bonds worldwide but they’re attracting a vast and diverse base of investors and companies. ESG bonds are contributing to the achievement of global climate and social goals, but clear guidelines to gauge their credibility and impact do not as yet exist.