Since the first sustainability-linked bond was issued by Italian energy company ENEL in September 2019, sustainability bonds and/or loan facilities have gained traction and more issuances are expected in the future. Green bonds—or social bonds—are issued for the specific purpose of funding or financing particular environmental or sustainable projects. In a departure from the established “use of proceeds” model for green, social and sustainable bonds, sustainability-linked bond proceeds are not earmarked for specific projects. Rather the pricing of the bond or loan facility is linked to certain sustainability targets evidencing the issuer’s commitment to a more sustainable future for its business and potentially helping companies make a gradual shift away from fossil fuels. For example, if environmental and sustainability targets such as reducing food waste or cutting carbon emissions are met, a decrease in the interest rate on the financing may follow, or if the targets are not met, the interest rate may ratchet up. In the Enel transaction, if ENEL fails to hit its target of increasing its renewable power generation from 45.9% at the time of issuance to 55% by the end of 2021, it would have to pay a 25 bps coupon step-up. Sustainability-linked financings, can also be a useful tool to encourage brown industries to shift to sustainable practices given the pressing need to address climate change, while maintaining accountability and demonstrating clear impact. Even as new issues are gaining traction, the efficacy of sustainability-linked bonds is still being debated and there are concerns that these might be suppressing green bond issuances and leading to greenwashing. Against this backdrop, on June 9, 2020 a working group of the International Capital Markets Association (ICMA) released the Sustainability-Linked Bond Principles that offers issuers and investors a set of best practices and guidelines when issuing sustainability-linked bonds.