Transition Bonds

Second-Party Opinion for your Transition Bond

Why is transition financing important?

Achieving international climate goals will require significant reduction of GHG emissions from carbon-intensive sectors. To date, these sectors have not been the focus of green finance and low-carbon solutions are generally not yet available at scale due to major technological and/or systemic barriers. Those are commonly referred to as transition sectors. While international climate goals are defined at the level of the economy as a whole, achieving climate goals requires the decarbonization of economic activities. Due to a distinct set of challenges and barriers for each economic activity, the transition pathway differs across different industries.

Benefits of Transition Bonds

Use-of-proceeds bonds are emerging as an important instrument to finance transition activities and projects. When supported by clear eligibility criteria and a credible transition strategy, transition bonds can facilitate a shift of a company’s business activities along a transition pathway compatible with long-term climate goals.

Key benefits for issuers of Transition Bonds:

Investor diversification for sectors that have been traditionally excluded from the green market but have a key role to play in addressing climate change
Enhance visibility of your bond, company and sustainability activities
Reinforce your sustainability strategy through commitments to investors
Increase investor dialogue and engagement that facilitates a better understanding of your business

Our Approach to Assessing Transition Bond Frameworks

Grounded in international science-based targets – Sustainalytics’ approach to assessing transition bond frameworks includes both issuance-level considerations and issuer-level considerations. For this, Sustainalytics developed detailed criteria for transition-eligible activities.

ISSUANCE-LEVEL

CONSIDERATIONS

Use of proceeds: Alignment of financed business activities and projects with Sustainalytics' transition eligibility criteria
Project evaluation and selection
Management of proceeds
Allocation and impact reporting

ISSUER-LEVEL

CONSIDERATIONS

Alignment of issuer's transition strategy and commitments with internationally established decarbonization pathways
Alignment of the use of proceeds with the issuer's strategy and implementation plan

Advantages of Second-Party Opinions

A Second Party-Opinion of your transition bond framework ensures that your bond is in line with market expectations and industry best practices. An SPO gives investors confidence in your transition bond issuance.

Independent Opinion that provides additional assurance to investors

Support issuers in positioning favourably in the market and widen their investor base

Align with market best practices

Our Second-Party Opinion process

Our framework evaluation process is simple yet thorough. We work closely with you to understand your sustainability objectives, your projects and your processes and ensure they align with transition pathways.