A financial incentive to help the planet falls flat

In December 2018, a new type of conservation finance arrived on the market. A Chinese company issued the first sustainability-linked bond (SLB), whose interest rates are tied to specific sustainability targets. SLBs peaked in 2021, with total issuance now running at about $280 billion. The problem is that most SLBs don’t align with global climate goals, according to a new report from the nonprofit Climate Bonds Initiative. It found just 14 per cent of 768 SLBs matched the Paris target of limiting global warming to well under 2C of pre-industrial temperatures, blaming a “high proportion of low-quality deals” that lack ambition and transparency. The good news: things improved last year, with 33 per cent of SLBs aligned with climate goals. The bad: it’s all a drop in the ocean against Mark Carney’s 2021 target of generating $100 trillion in new investment, mainly from the private sector, to transition the planet to net zero.