When Cadent Gas Ltd. wanted to switch elements of its pipeline community throughout England this 12 months, it raised €500 million promoting a brand new sort of debt, often known as transition bonds.
These bonds, price $560 million, are being positioned as a part of a do-good pool of investment alternatives that monitor environmental, social and governance (ESG) benchmarks and have soared in reputation lately. However somewhat than being issued by corporations that declare to have a excessive ESG rating, transition bonds are designed for companies which are nonetheless cleansing up their act.
As with different ESG investments, there are not any hard-and-fast definitions or rules to find out who raises the funds, and for what objective. Usually, the transition bonds are supposed to fund tasks that make an organization’s operations extra environmentally pleasant, and assist transfer towards creating a lower-carbon financial system.
Bankers, authorities officers and different stakeholders are attempting to compile tips for this new asset class. Even a voluntary framework would assist spur a growth by lending a component of legitimacy, they are saying.