ESG finance: investing in a brighter future

The market for ESG finance has experienced significant growth in recent years, with almost €750 billion of ESG bonds and loans issued in Europe in 2021, an increase of 89% when compared to 2020. This number is expected to increase further in 2022 as companies and other market participants seek to demonstrate their commitment and ambition to a more sustainable future by using an existing financing need to support and complement their wider ESG strategies.

This article by Peter Allen, Joe Amann and Reena Parmar aims to demystify ESG finance and sets out some of the considerations that may be relevant for a company seeking to fund itself using ESG finance products. In the interests of brevity, the article focuses only on the core loan and bond products, but many of the same considerations apply to all ESG finance products. It discusses use-of-proceeds instruments, such as green bonds and loans, and ESG-linked or target-linked instruments, such as sustainability-linked bonds and sustainability-linked loans. It also explores a number of issues that companies will need to consider when seeking to raise ESG finance and the trends that are likely to continue or emerge in the future.

This article first appeared in the June 2022 issue of PLC Magazine. See https://uk.practicallaw.thomsonreuters.com/Browse/Home/Resources/PLCMagazine

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