Climate Bonds screens self-labelled debt instruments for inclusion in the Climate Bonds Databases.
One such database contains sustainability-linked bonds (SLBs), for which this document describes the requirements for inclusion and the database screening and maintenance process.
Sustainability-linked bonds (SLBs), together with their green, social, and sustainability (GSS) counterparts, provide powerful and complementary tools to raise capital for entities seeking to drive deep decarbonisation and deliver a range of environmental and social goals.
When used to tie the cost of financing to sustainability key performance indicators (KPIs), SLBs can incentivise and penalise entities to achieve those metrics, even if they do not have sufficient green assets, projects, or expenditures to raise sustainability related use-of-proceed (UoP) bonds.
While Climate Bonds supports and encourages the diverse use of the performance-linked debt format, within the context of this methodology, SLBs are a transition instrument to drive decarbonisation, and the requirements for inclusion in the Climate Bonds SLB Database focus on decarbonisation.
The methodology assessment is based on the targets tied to the debt instrument
Screening credibility for sustainability-linked bonds
The eligibility criteria are based on the relevant parts of Climate Bonds’ Five Hallmarks for Credibly Transitioning Companies, first published in the 2021 discussion paper, "Transition Finance for Transforming Companies". Specifically, it uses Hallmarks 1 and 5 to develop instrument-level assessment criteria. Hallmarks 2, 3, and 4 are also screened to track the development of entity-level transition plans that underpin the targets. The process is summarised in the flowchart below, and full details can be found in the methodology document.
Climate Bonds Sustainability-linked Bond Database Methodology overview