Sustainability bonds are the most recent addition to the collection of sustainable finance instruments and tie key elements of green and social bonds together to form a new sustainable finance bond. The structure, risk and return on sustainability bonds is similar to all other bonds classifications. The biggest differentiator between sustainability bonds and other bond classifications is that the funds of these bonds must be used to finance a combination of both green and social ventures. They are regulated instruments subject to the same capital market and financial regulation as other listed fixed income securities.
Certain social projects may also have environmental benefits, and certain green projects may have social co-benefits. In order to classify a bond with the sustainable instruments category, the issuer first needs to determine the primary objective to be achieved through the financing of a project in order to ensure the correct classification is given.