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      Question

      How do Sustainability-Linked Bonds (SLBs) differ

      fundamentally from Green or Social Bonds regarding the utilization of funds?
      A Proceeds from SLBs can only be given as direct grants to international environmental NGOs. Correct Answer Incorrect Answer
      B Proceeds from SLBs can be used for general corporate purposes, while financial terms depend on meeting predefined ESG targets. Correct Answer Incorrect Answer
      C Proceeds from SLBs must be shared equally between government infrastructure and public health schemes. Correct Answer Incorrect Answer
      D SLBs do not raise any actual capital and function purely as a corporate credit rating mechanism. Correct Answer Incorrect Answer
      E SLBs require the issuer to completely shut down all carbon-heavy operations within 12 months. Correct Answer Incorrect Answer

      Solution

      Unlike green or social bonds where proceeds are restricted to specific projects, proceeds from SLBs can be used for general corporate purposes. Instead, the bond's financial terms (like coupon rates) are tied to meeting predefined ESG targets (KPIs and SPTs).

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