Sustainability-Re-linked Bond

Sustainability-Re-linked bonds (SRLB) are a specific type of sustainability-linked bonds or SLB. The main differences between these two types of ESG bonds are as follows:

1. The proceeds from SRLB are not used to achieve any sustainability goals by the issuer, but exclusively to finance loans that are in turn provided to achieve goals related to sustainability (the so-called sustainability-linked loans or SLL).

2. The issuance of SRLB is more typical for issuers from the  banking sector, which finance their clients in this way, than for issuers from the non-financial sector.

3. The interest rate on SRLB depends on the fulfillment of SLL borrowers' obligations to achieve sustainability goals and can be increased if SLL borrowers fail to achieve them.

In the interests of the SRLB issuer, the SLL portfolio is carefully formed. A preliminary list of borrowers is formed before the SRLB is issued. It should not include borrowers from categories such as manufacturers of weapons, alcohol, tobacco, as well as companies from the minig industry, or related to nuclear energy. After the SRLB issuance, the issuer distributes the funds raised among the SLL borrowers and creates a register of SLL borrowers indicating the purposes of receiving loans, terms and set goals. On a regular basis (usually annually), the SRLB issuer publishes a report on the status of SLL borrowers, and can also make changes to the list of borrowers, for example, in the event of early repayment of loans. External verification is carried out by the External Verifier appointed for the bond, who also publishes his reports on a regular basis. If the amount of SLRB raised is greater than the amount of the SLL portfolio, the unused portion is retained by the issuer until a suitable borrower appears under the SLL or, if this is agreed in advance in the terms of the issue, it can be temporarily invested in ESG bonds of other issuers.