What is a primary purpose of a green bond?

A primary purpose of a green bond is to raise funds specifically for projects that have positive environmental benefits. Green bonds are a type of fixed-income instrument where the proceeds are exclusively used to finance or refinance projects that aim to achieve environmental sustainability. This can include projects related to renewable energy, energy efficiency, sustainable water management, biodiversity conservation, and pollution prevention, among others.

By using the capital raised through green bonds, organizations can directly contribute to environmental initiatives that have a measurable impact, addressing issues like climate change and resource depletion. This focus on projects with clear positive environmental outcomes distinguishes green bonds from other types of financing instruments that may not have such a targeted environmental purpose.