ACCA Strategic Professional · Advanced Financial Management · Corporate environmental, social, governance (ESG) and ethical issues
Which of the following is a typical feature of a sustainability-linked bond?
A sustainability-linked bond has financial terms, usually the coupon, that vary according to whether the issuer meets predefined sustainability performance targets. Unlike a green bond, proceeds are not restricted to specific green projects and can be used for general corporate purposes.
- AIts coupon or other terms change depending on whether the issuer meets pre-set sustainability targetsCorrect
- BProceeds must be spent only on named green projects
- CIt pays no interest and is issued at a deep discount
- DIt is convertible into equity if emissions fall
Explanation
Sustainability-linked bonds tie financial characteristics, such as a coupon step-up, to the issuer meeting predefined sustainability performance targets, and proceeds can be used for general purposes. Use-of-proceeds restriction describes a green bond instead.
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