Sustainability-Linked Bonds: Financial Over ESG Benefits

The growth of sustainability-linked debt new issuance in recent years is connected with greater demand for investments with an ESG or 'sustainable' component. These instruments also can be versatile enough to represent a valid alternative to plain-vanilla debt for issuers. In this commentary, we analyse the credit implications of issuing such instruments.

"There are three main reasons for issuing sustainability-linked debt", says Edoardo Danieli, Assistant Vice President of European Corporates at DBRS Morningstar. "Firstly, to improve the company's ESG credentials; secondly, to modestly lower the cost of funding; and finally, to maintain access to funding."