Are sustainability-linked bonds really a green option?

Sustainability-linked bonds offer investors a profitable way to lend to companies with green and social targets, say supporters, but others are unconvinced by their credentials

Sustainability-linked bonds allow investors to provide companies with balance sheet financing linked to targets such as greenhouse gas emissions reductions or boardroom diversity, as opposed to financing specific projects through instruments like green bonds. Investors normally receive additional payouts in the form of coupon step-ups if these targets are missed, a practice that has been called into question by some experts for its rather perverse logic of rewarding investors for a company’s failure to be as sustainable as planned.