Carole Sanz-Paris leads the debt capital markets team at IDB Invest. She is a specialist in fixed income, structured finance transaction execution, sale-side research, and credit analysis. She defines herself as passionate about investing with social impact. Carole has more than 20 years of experience in global capital markets; she has been responsible for the structuring, execution and placement of many complex financial structures, including securitizations. She has published extensively on the relative value of fixed income products and credit analysis, having developed her interest in social responsibility and impact investing while earning her Executive MBA from Oxford University.
The risks involved in sustainability-liked bonds often focus on insufficiently robust and ambitious targets and KPIs, improperly crafted incentives and structural loopholes. All these can be alleviated with better monitoring of issuers.
Sustainability-linked bonds provide issuers with much leeway for the use of proceeds and market participants are getting a better understanding of their risks and rewards, as well as how they can be “gamed”. Green-washing is only one of several risks looming.
Sustainability-linked bonds have key perks for issuers including ensuring the walk-the-talk of sustainability and corporate strategies; use of funds for general corporate purposes; investor attraction and diversification; potential ‘greenium’, and others.
SLBs are new type of ESG-friendly bonds with variable coupons tied to sustainability targets. As opposed to green, social or sustainable bonds, issuance proceeds are not tied to specific green or social projects or assets; the focus is on the company’s ability to meet its commitments.
Equities have traditionally dominated the market for ESG investing, but green, social and sustainable bonds, commonly called thematic bonds, are the hot new thing. Latin America and the Caribbean is uniquely positioned to benefit from this new type of investment.
It comes down to this: the only way to recover from the pandemic is through sustainable development. Thematic bonds can be green, social or sustainable (a combination of green and social projects).