What is the primary function of sustainability bonds?

Sustainability bonds are specifically designed to finance projects that aim to deliver both environmental and social benefits. This integrated approach reflects the growing recognition of the interconnections between sustainable development goals, such as climate action and social equity. By issuing these bonds, organizations can raise capital that is explicitly earmarked for initiatives that tackle environmental challenges, like renewable energy or conservation efforts, while also addressing social issues, such as affordable housing or healthcare access.

This dual focus is crucial in promoting a holistic approach to sustainability, recognizing that environmental health and social well-being are mutually reinforcing. Hence, sustainability bonds represent a broad-based investment in the future, aligning with global trends toward responsible investment practices that consider environmental, social, and governance (ESG) criteria.