By Mark Hulbert, Callaway Climate Insights
CHAPEL HILL, N.C. (Callaway Climate Insights) — The gap between exciting potential and depressing reality continues to widen for sustainability-linked bonds (SLBs).
I’m referring to bonds whose interest rates are dependent on the issuing company meeting specific sustainability targets. In theory they represent a huge step forward in the finance arena’s response to climate change. They are different from so-called green bonds, in which the issuing company agrees to only use the proceeds on green projects but makes no commitment to actually reducing its carbon footprint. With SLBs the issuers commit to certain externally-verifiable outcomes — and put a price tag on failing to do so.
SLBs represent a market-based way of holding companies’ feet to the fire. With an SLB the issuing company can potentially secure a lower cost of capital, and investors can get at least some assurance that the issuer’s commitments are more than just talk.
That oil and gas company committing to become carbon neutral by 2050? Offer them 30-year financing with a below-market interest rate if they make good on their commitment, but which jumps to a higher rate if they don’t meet their target. There should be a market-clearing price for such a transaction.
That’s the theory. The reality is far different, according to a just-completed study, which found that issuing companies more often than not have used SLBs to take advantage of well-meaning but gullible investors. . . .
To read this column, all our insights, news and in-depth interviews, please subscribe and support our great climate finance journalism.
Callaway Climate Insights Newsletter
Travel Cards Are Getting Too Good To Ignore (sponsored)
Credit card companies are pulling out all the stops, with the issuers are offering insane travel rewards and perks.
We’re talking huge sign-up bonuses, points on every purchase, and benefits like lounge access, travel credits, and free hotel nights. For travelers, these rewards can add up to thousands of dollars in flights, upgrades, and luxury experiences every year.
It’s like getting paid to travel — and it’s available to qualified borrowers who know where to look.
We’ve rounded up some of the best travel credit cards on the market. Click here to see the list. Don’t miss these offers — they won’t be this good forever.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.