SDG Bonds: An Exploration, via a Case Study, of the Key Attributes of a Novel Financial Instrument That May Help Achieve Agenda 2030’s Sustainable Development Goals

17 Pages Posted: 9 Dec 2019

See all articles by Michele Bina

Michele Bina

The University of Hong Kong - Faculty of Social Sciences

Date Written: November 22, 2019


The launch by the United Nations of Agenda 2030 with its 17 Sustainable Development Goals (SDGs) is creating new paradigms for business, capital markets, society, and many other fields of human endeavor. Financing the SDGs is an important part of the solution. While Green bonds have taken a prominent role over the last decade in financing sustainability projects, their application remains a capital markets niche.

The SDGs, because of their multiplicity, shift the paradigm from a focus on single “green” projects to a holistic concept of sustainability which goes beyond the single project or asset typically financed with Green bonds. As a result of the growing evidence of the significant business opportunities the SDGs offer, corporations are now increasingly embracing this holistic approach to sustainability and are deeply embedding the SDGs into their long term corporate strategies. Consequently corporations have been looking for a financial instrument that better caters to this holistic, rather than ad-hoc, approach to sustainability.

SDG Bonds have been proposed as an answer to this need. The general-purpose SDG Bonds in particular offer the required flexibility to achieve broader goals beyond single project financing and importantly, provide an unambigous signal of this intention to investors who are increasingly seeking opportunities in this space. There are three cornerstones that underpin SDG Bond transactions:

1. A clear link to the sustainability strategy of the issuer, through pre-determined sustainability targets
2. An upfront discount in the pricing of the SDG Bond issue, that reflects the economic value of the sustainability strategy of the issuer
3. The assurance provided by external auditors on the achievement of the predetermined sustainability targets.

The successful launch in September 2019 of the first ever general-purpose SDG Bond by ENEL, a multinational corporation, is a milestone in the financing of Agenda 2030. Potentially this expands opportunities to finance Agenda 2030, and indeed could be the beginning of a paradigm shift in debt and, perhaps in future, equity capital markets as holistic approaches to sustainability increasingly define corporate missions and investors’ perspectives.

This behavioral shift by corporations and investors, and the creation by capital markets of new financial instruments to accommodate these aspirations may have another consequence. They may also represent further evidence of the declining relevance of economic theories based on “rational economic man”, and much of the microeconomic foundations of neo-classical economics.

This paper examines the rationale that has led a major global corporation to issue SDG Bonds and how these differentiate themselves from Green bonds in significant ways. There are some, unexpected, consequences stemming from this event which are also briefly explored in this paper. Market pricing of SDG Bonds is analysed; it points to potential market failures in a number of areas. This, as well as other themes explored here, suggest several avenues of further research in what promises to become a rich new segment of study both for academics and practitioners in the capital markets.

Keywords: SDG Bonds, Green Bonds, Agenda 2030, Green Finance, Sustainability, Corporate Finance, Sustainable Development Goals, Governance

JEL Classification: F30, F34, F38, F65, G02, G11, G12, G14, G15, G21, G24, G32, O16, O19, O31

Suggested Citation

Bina, Michele, SDG Bonds: An Exploration, via a Case Study, of the Key Attributes of a Novel Financial Instrument That May Help Achieve Agenda 2030’s Sustainable Development Goals (November 22, 2019). Available at SSRN: or

Michele Bina (Contact Author)

The University of Hong Kong - Faculty of Social Sciences ( email )


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