How SLB Principles meet companies halfway with sustainability targets

Green Bonds Series (Part 2)

When we think about ESG bonds, the first thing that will most likely come to people’s minds is the question, what ESG related projects are funded by the bond’s proceeds? In our last article, this is exactly what we were looking at, ICMA’s Green and social bond principles.

However, there are companies in specific industries such as oil companies that cannot simply hop on the next greenfield investment bandwagon to improve their ESG score, as they have billions of dollars tied up in machines and technology to maintain their current operations. These companies can be considered as so-called “sin stocks”, but rather than dismissing them entirely maybe there is a way to incentivize them to go green without shifting the entire business?

The good news… yes there is! By means of the ICMA’s sustainability-linked bonds, companies become explicitly liable to achieve specific sustainability-linked targets and KPIs which are directly connected to the financial structure of their issued debt instrument.