Question 1

What is sustainable debt?

Accepted Answer

Sustainable debt refers to financing instruments such as green bonds, social bonds and sustainability‑linked bonds or loans that fund projects with environmental or social benefits or tie the cost of capital to a borrower’s sustainability performance.

Question 2

What’s the difference between green bonds and sustainability‑linked bonds?

Accepted Answer

Green bonds earmark proceeds for specific environmental projects; sustainability‑linked bonds allow general corporate use but include performance targets that adjust the coupon or margin depending on whether sustainability KPIs are achieved.

Question 3

What should issuers consider when structuring sustainable debt?

Accepted Answer

Issuers should align use‑of‑proceeds or KPIs with recognized frameworks, set credible and ambitious targets, establish strong governance and reporting systems, and engage investors early to understand pricing and disclosure expectations.

Question 4

What are the risks involved?

Accepted Answer

Key risks include accusations of greenwashing if claims are unsubstantiated, penalties for missing performance targets, additional reporting burden and potential regulatory scrutiny. Transparent disclosures and credible targets help mitigate these risks.

2026 Guide to CDP

The Sheet Volume 16

2026 CDP Guide to Updates and Actions

Start your course for sustainability today.