Green Loans, Green Bonds & Blue Bonds Jargon Buster

What is a sustainability-linked loan?

This is a loan used to incentivise a company to become more sustainable by offering them cheaper rates. For example, a lender could give a retail company a cheaper loan if they reduce their single-use plastic by 10% each year. The terms of the loan are linked to a sustainable or an ESG outcome. 

The company or consumer must prove that they really are doing what they promised and there are some guidelines in place to help financial services, such as the Sustainability Linked Loan Principles (SLLP).

What is a green bond?

These are bonds or debt instruments - money is raised or loaned to an organisation so that they can pay for an ESG or sustainable initiative. 

Governments can also raise green bonds, called sovereign green bonds. The UK issued two AA rated green gilts in 2021. According to the government website, the money raised will be used to finance expenditures in clean transportation, energy efficiency, renewable energy, pollution prevention and control, living and natural resources, and climate change adaptation.

Likewise, the European Commission issued its first ever green bond. €12bn was raised to fund green and sustainable investments across the region, as part of the EU’s wider Green Deal. 

Corporations can also raise green bonds, called corporate green bonds. 

What is a blue bond?

This is akin to a green bond for the ocean. It mostly applies to fisheries, shipping, marine renewable energy, waste management, sanitation, ocean-draining and marine tourism. 

Likewise, there are also sovereign blue bonds. The Seychelles launched the first one ever in 2018 to transition their fisheries and safeguard their waters and Belize is also raising a blue bond.