The Singapore Exchange (“SGX Group“) identifies green, social and sustainability (“GSS“) bonds listed on the SGX-ST that meet recognised standards as Sustainable Fixed Income instruments. However, SGX Group has not recognised a different class of sustainable debt, namely sustainability-linked bonds (“SLBs“), and this initiative is under review. SLBs are a relatively new fund-raising instrument for issuers. The issuer of an SLB (“SLB issuer“) is required to set certain sustainability performance targets (“SPTs“) which in turn affect the characteristics of the bond such as the coupon rate. The SLB issuer, in return, has unfettered use of the funds raised, unlike in the case of GSS bonds which proceeds can only be used for eligible green projects. In its media release on “Addressing concern about sustainability-linked bonds with enhanced targets and structure”, SGX Group addressed two key aspects for the broader adoption of SLBs: (1) credibility of the SPTs; and (2) the product structure. This Update outlines SGX Group’s views on these two aspects, along with our comments.
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