Ethical Debt Glossary: ESG, SLB, SLL, KPIs and More

It’s a field that goes by a variety of names — ethical debt, green finance or ESG (environmental, social and governance) financing. Whatever you call it, it’s become increasingly mainstream: The amount of money raised through the sale of such bonds and loans in the first half of 2021 already matched the $700 billion for the whole of last year, according to Bloomberg data. That’s a sliver of the $100 trillion bond market, but ambitions are high. The European Union sees reshaping credit markets as crucial to blunting climate change. Innovation in the form of more flexible asset types is lowering barriers to investment, by linking borrowing costs to broad goals instead of specific purposes. The shift is also adding new terms to an already jargon-heavy field. Here’s a guide.

Money raised from this kind of “use of proceeds” debt is to be spent exclusively on a project with an environmental purpose. France, the biggest sovereign issuer of green bonds, sold 7 billion euros ($8.3 billion) in notes in early 2021 to fight climate change and pollution and to protect biodiversity. Green remains king in the ESG bond market, with more than $220 billion of such notes sold in the first half of 2021, roughly one-third of all ESG debt, according to data compiled by Bloomberg. Some in the field have begun referring to green bonds for marine and ocean-based projects as blue bonds.