What characterizes a green bond?

A green bond is specifically designed to raise funds for projects that have positive environmental impacts. This can include initiatives focused on renewable energy, energy efficiency, pollution prevention, sustainable agriculture, and sustainable forestry, among others. By being oriented towards financing projects that contribute to climate change mitigation and other ecological benefits, a green bond serves as an effective financial instrument for fostering sustainability.

The other options do not accurately reflect the nature of green bonds. While corporate finance tools can indeed be high-risk, a defining characteristic of a green bond is not its risk profile but rather its purpose. Although government savings bonds are safe investments, they are not related to specific environmental projects. Lastly, while some green bonds may indirectly support social enterprises, their primary focus is environmental benefits, not exclusively social aspects. Therefore, the correct answer emphasizes the essential role of green bonds in funding climate and environmental projects.