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A Brief Guide to the World’s First Sustainability Re-Linked Bond

  • Bank of China’s $300m bond coupon has rare step-down clause
  • Debt coupon is linked to underlying ESG loans made by the bank
Power Generation in Germany
Photographer: Krisztian Bocsi/Bloomberg

It’s the first of its kind: a bond linked to the ethical targets of a pool of its existing loans to various companies. 

The $300 million so-called re-linked notes were sold by the Bank of China Ltd.’s London branch last month. The three-year coupon is subject to the environmental, social and governance terms of five loans in its second and third year -- from companies located in the U.S., U.K., Hong Kong and Singapore, according to the bond’s documentation.