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Sovereigns and sustainable bonds: challenges and new options

Author

Listed:
  • Gong Cheng
  • Torsten Ehlers
  • Frank Packer

Abstract

The sustainable bond market, comprising green, social and sustainability (GSS) bonds, continues to develop rapidly. Until recently, sovereign issuers played only a minor role, due in part to tensions between the use-of-proceeds earmarking of GSS bonds and the fungibility requirements for many sovereigns. That said, sovereign GSS bond frameworks rely on stringent reporting and verification standards, thus setting goalposts for private issuers to aim for. Sustainability-linked bonds allow an unrestricted use of proceeds and – if based on contractual terms that sufficiently align issuers' incentives with sustainability objectives – can provide sovereigns with new options to make progress towards carbon emission reduction targets.

Suggested Citation

  • Gong Cheng & Torsten Ehlers & Frank Packer, 2022. "Sovereigns and sustainable bonds: challenges and new options," BIS Quarterly Review, Bank for International Settlements, September.
    • Handle: RePEc:bis:bisqtr:2209d
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    References listed on IDEAS

    as
    1. Gong Cheng & Eric Jondeau & Benoît Mojon, 2022. "Building portfolios of sovereign securities with decreasing carbon footprints," Swiss Finance Institute Research Paper Series 22-66, Swiss Finance Institute.
    2. Torsten Ehlers & Benoit Mojon & Frank Packer, 2020. "Green bonds and carbon emissions: exploring the case for a rating system at the firm level," BIS Quarterly Review, Bank for International Settlements, September.
    3. repec:bla:ecpoli:v:19:y:2004:i:38:p:165-216 is not listed on IDEAS
    4. Torsten Ehlers & Frank Packer, 2017. "Green bond finance and certification," BIS Quarterly Review, Bank for International Settlements, September.
    5. repec:oup:ecpoli:v:19:y:2004:i:38:p:165-216 is not listed on IDEAS
    6. Marta Domínguez-Jiménez & Alexander Lehmann, 2021. "Accounting for climate policies in Europe’s sovereign debt market," Bruegel Policy Contributions 42526, Bruegel.
    7. Eduardo Borensztein & Paolo Mauro, 2004. "The case for GDP-indexed bonds [‘World income components: measuring and exploiting risk-sharing opportunities’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(38), pages 166-216.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Richard Schmidt & Pinar Yesin, 2022. "The growing importance of investment funds in capital flows," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 72(01), pages 1-40, December.
    2. Giusy Chesini, 2024. "Can Sovereign Green Bonds Accelerate the Transition to Net-Zero Greenhouse Gas Emissions?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 30(2), pages 177-197, May.
    3. Gong Cheng & Torsten Ehlers & Frank Packer & Yanzhe Xiao, 2024. "Sovereign Green Bonds: A Catalyst for Sustainable Debt Market Development?," IMF Working Papers 2024/120, International Monetary Fund.
    4. Clarisse Heck Machado & Miguel Sousa & Manuel Castelo Branco, 2025. "Sustainability-Linked Bonds Research: A Bibliometric and Content Analysis Review," IJFS, MDPI, vol. 13(2), pages 1-22, April.
    5. Georgeta Ilie & Claudia Gabriela Baicu, 2023. "Green Finance €“ International Initiatives And Relevant Practices In Supporting Global Sustainable Goals," Social-Economic Debates, Association for Entreprenorial Spirit Promotion, vol. 12(1), pages 28-38, octombrie.
    6. Bert Van Roosebeke & Ryan Defina, 2023. "The Role of Climate in Deposit Insurers' Fund Management: More Than a Financial Risk Management Factor?," IADI Survey Briefs 5, International Association of Deposit Insurers.
    7. Swayam Prava Mishra & Rajnish Kumar & Jashasya Rout, 2023. "An overview of green, social, sustainability, and sustainability-linked (GSSS) bonds," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(1), pages 127-145, December.
    8. repec:sdb:social:v:12:y:2023:i:1:p:1-10 is not listed on IDEAS
    9. Di Tommaso, Caterina & Perdichizzi, Salvatore & Vigne, Samuel & Zaghini, Andrea, 2024. "Is the government always greener?," CFS Working Paper Series 718, Center for Financial Studies (CFS).
    10. Daniel C. L. Hardy, 2022. "Alternatives in the Design of Sovereign Green Bonds," wiiw Policy Notes 62, The Vienna Institute for International Economic Studies, wiiw.

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    More about this item

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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