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The market for green, social and sustainability bonds has been growing rapidly over the past few years, reaching a total of $1.4 trillion in issuance, including $490 billion for 2020 alone. For the time being, the Gulf region accounts for only for a tiny part of it. However, this is about to change, in part thanks to the recent creation of a new financial instrument: The sustainability-linked bond.
Green, social and sustainability bonds are all use-of-proceeds financial instruments. While these bond formats provided investors with clarity and transparency in terms of what is being financed or refinanced with the proceeds raised from their issuance, some issuers perceive the use-of-proceeds structure as too restrictive and have stayed away from this market.