Thematic Bonds: Opportunities and Risks

Even those who don’t believe in the concept itself can no longer deny the fact that climate change is disrupting how business is done. Companies are witnessing dramatic changes in the business environment, regulatory policy, access to finance, and stakeholder expectations, and as such, are making sweeping changes to address risk and capitalize on opportunities. To navigate the coming transformative decade, businesses will need to think creatively about how they can harness available resources.

A key element to mitigating sustainability risks and seizing opportunities in this disruption is unlocking access to capital. In the last decade, financing has been increasingly directed towards public and private markets who have made the transition to a sustainable business model. For example, according to a 2021 United Nation Environmental Programme (UNEP) report, two consequences are expected from this change in finance: “first, financing of new projects (debt and/or equity) will be more readily available for sustainable projects, and second, existing financial portfolios will be restructured to favor companies with environmentally sustainable business plans and performance.”1

Growth of Sustainable Debt Financing

Issuing debts, especially as bonds, to finance public infrastructure spending or private capital expenditures (CAPEX) is not new. However, in the last decade newer versions of age-old financing techniques have become increasingly popular. Of these newer financial instruments, using “thematic bonds” to address disruption caused by climate change has seen growth across sectors and geographies. Since the European Investment Bank and the World Bank issued the first “green bonds” in 2007, the total size of the thematic fixed-income market has grown to USD 1 trillion.2

Thematic bonds conceptual graphic showing currency and growth chartLike regular bonds, thematic bonds are issued by governments, multinational banks, and corporations. The issuing entity guarantees repayment over a certain period, plus either a fixed or variable rate of return. But unlike regular bonds, these fixed-income instruments are issued to raise finance for a diverse range of sustainability solutions. These thematic bonds require disclosure and reporting on the use of the issuer’s proceeds. These might be greenhouse gas emission reduction projects, energy efficiency real estate investment, building affordable housing, or financing clean energy infrastructure projects.

Broadly, there are five different thematic labels, each with their own requirements and nuances:

  • Green
  • Social
  • Sustainability
  • Transition
  • Sustainability-linked bonds

Sometimes all of these are grouped under the larger umbrella of “climate bonds”, or “sustainability bonds”, or even “green bonds”.

Since 2015, non-financial corporates have increased their share in the thematic bond market; according to the Climate Bond Initiative, in 2021, non-financial corporates were the largest issuer type based on cumulative volumes ($361B) beating out sovereigns (bonds issued by national governments), financial corporates, and government backed entities, among others.

Avoiding Greenwashing

Despite this astronomical growth in the sustainable debt market, “greenwashing” is a concern for both issuers and investors: How can investors be certain that issuers are not misrepresenting the positive impact of bond proceeds? And for the issuer, how can they meet the additional proceeds, management, and reporting requirements expected by thematic bond investors?

As the thematic debt market matures, rules and expectations are being put in place. For issuers, the market best practice is to issue thematic bonds that include a bonds’ framework, including the use of proceeds, process of project selection, management of proceeds, and reporting in accordance with the voluntary guidelines developed by The International Capital Market Association (ICMA). So far, ICMA has created the Green Bond Principles (GBP), Social Bond Principles (SBP), the Sustainability Bond Guidelines (SBG) and the Sustainability‑Linked Bond Principles—collectively called “The Principles”. These principles are important, because it is against these that a bond’s framework is externally reviewed using industry and assurance standards to minimize greenwashing.

How Apex Can Help

Second-party opinions (SPOs) are an assessment of the alignment of the issuer’s green, social, sustainability, or sustainability-linked bond framework or transition with the relevant “principles”.

Apex Companies relies on well-established industry standards, knowledge of market expectations, and our over 30 years’ experience as a leader in climate and sustainability assurance to provide SPO services for thematic bonds.

An SPO from Apex will include an assessment of the issuer’s overarching environmental/social objectives of the bond opinion on the elements of the framework and mapping the bond’s use of proceeds to the UN Sustainable Development Goals. An SPO from Apex demonstrates the bond’s alignment with market best practices, and our independent opinion ensures you meet investor expectations.

To learn more about Apex’s established suite of sustainable consulting and assurance services, see our Sustainability & ESG Solutions or contact us today!

1 United Nations Environment Programme (2021). Changing Finance to Catalyze Transformation: How financial institutions can accelerate the transition to an environmentally sustainable economy. UNEP, Nairobi.
2 10 Years of Green Bonds: Creating the Blueprint for Sustainability Across Capital Markets (, March 18, 2019.

Apex Associated Press (Apex AP) represents contributions from various authors within the Apex professional community.


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