"What is the essence of Sustainable Development Bonds?"
DOI:
https://doi.org/10.65263/ez96hg77Keywords:
Sustainable Development، SustainableDevelopment Bonds ،Sustainable Development Bond Criteria ،Green BondsAbstract
Abstract
Sustainable Development Bonds (SDGs) are a modern financial innovation representing an equal-value debt instrument issued by governments and corporations to finance projects with a dual positive impact—environmental and social—in line with the Global Sustainable Development Goals. These bonds share similarities with other securities; however, they are distinct due to a legal commitment to exclusively use the proceeds to finance sustainable projects. This necessity demands a high level of transparency, particularly concerning the preparation of periodic reports on the achieved environmental and social impact. Despite their novelty, their importance is not limited to providing a massive source of funding for infrastructure and development projects. It also extends to attracting a broader base of investors interested in Environmental, Social, and Governance (ESG) criteria, enhancing the institutional reputation of issuers, and supporting the economic transition towards more sustainable pathways. These bonds derive their philosophical foundation from the United Nations Sustainable Development Agenda, which makes them broader in scope and more comprehensive than Green Bonds, which focus solely on the environmental dimension. To ensure their credibility, these bonds are subject to strict international standards related to the mechanism for project selection, the management and tracking of proceeds, and the preparation of impact reports.
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