Fitch: Use-of-proceed Sustainable Bonds Have Limitations 

Sustainable Fitch has found that most use of proceeds sustainable debt make a good contribution to environmentally or socially positive activities, but some activities appear underfunded. Themes in need of greater attention include pollution prevention, employment generation and climate adaptation – despite being paramount to some sectors such as real estate. In a new report, Sustainable Fitch analysed green, social and sustainability bonds, focusing on their contribution to green and/or social impact and the level of transparency and ambition in project or target selection. There is a general skew towards capital-intensive projects across all bond labels, leaving some activities with a clear link to real assets relatively underfunded, it found. Most of the bonds analysed had a low score for allocation of proceeds to new projects, meaning that either the share of new projects financed is less than 25% or that the issuer has not provided any information on the split between new and existing projects. Green instruments perform better than social ones in terms of the share of new projects.  

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