EMEA speculative-grade sustainable bonds, including sustainability-linked notes and bonds that use proceeds for green projects, have weaker covenants than non-sustainable bonds, according to new research from Moody’s. Green bonds covered by the ratings agency in 2021 had a weaker average covenant quality score versus non-green bonds, offering less protection in almost every category. Moody’s said private equity-sponsored issuers were increasingly favouring green bonds for their inaugural issues, and were typically using “recent drafting techniques” include weaker protections. European covenant quality hit an all-time low in the fourth quarter of 2021, according to the research note. “This again was related to the large number of PE-backed companies that issued bonds featuring weaknesses that we had only seen in a handful of transactions previously,” said Moody’s.