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Back in trend: companies are increasingly relying on sustainable bonds!
Find out how sustainability bonds will become more important again in 2025 and support companies on the path to decarbonization.
Back in trend: companies are increasingly relying on sustainable bonds!
There is currently an exciting comeback in the financial world: sustainability-linked bonds, also known as sustainability-linked bonds (SLBs). Loud Option Finance The market for SLBs has changed in recent years and current trends give cause for hope. Following a decline in the total amounts collected in 2024, many companies in France are now ready to issue new SLBs.
Recent issuances by companies such as Eramet, Spie and Carrefour clearly show that French firms continue to be active in the public bonds sector. While Eramet raised €100 million on May 21 by increasing an existing bond, Spie raised €600 million over five years just a day earlier. Carrefour joined the trend and launched 500 million euros over four years. All three companies have issued SLBs, which come with a mechanism to increase the interest rate if their sustainability targets are not met.
Climate change as a driver
But why are SLBs so fascinating? Companies must increasingly adapt to climate change and decarbonize their activities. The climate performance of companies defines how much they can reduce their greenhouse gas emissions (GHG). These emissions are divided into three categories: Scope 1 refers to direct emissions, Scope 2 to emissions from energy consumption and Scope 3 to indirect emissions. The need to adapt varies from sector to sector and the consequences of neglect can pose financial risks in the long term, such as Bank of France explained.
The financial commitment from SLBs promotes issuers' commitment to reducing GHG emissions, although the actual measures implemented and the relevance of the set targets are often difficult to assess. Even though the financial penalties for non-compliance are relatively small, companies issuing SLBs show a strong interest in transitioning towards sustainable practices.
Regulation and transparency
Important guidelines come from the International Capital Market Association (ICMA), which with its Sustainability-Linked Bond Principles (SLBP) sets out structural characteristics, disclosures and reporting for SLBs. These principles, aimed at all types of issuers, provide clear guidance on the selection of key performance indicators (KPIs) and also include an up-to-date register of these KPIs. The 2024 version is intended to help provide further clarity for market participants.
Towards greater transparency, the SLBP encourage issuers to disclose information about their sustainability strategies to promote compliance with the Principles. Such a measure could strengthen the market for SLBs and help issuers more clearly communicate their commitment to sustainable development.
Overall, it should be noted that the return of SLBs offers both companies and investors the opportunity to actively contribute to reducing greenhouse gas emissions. With the significant increase in activity in 2025, the market for SLBs could stabilize again and continue to grow. It remains exciting to see how this trend will develop and what role SLB practices will play in the future financial landscape.