Sustainability-linked finance aims to encourage borrowers to meet environmental, social, or governance (ESG) objectives by offering pricing incentives. Since its introduction in 2017, it has grown into the fastest-expanding sustainable finance instrument, with more than $809 billion issued to date in sustainability-linked loans and bonds [1].
According to [2], Green bonds are fixed income debt instruments like any other bond. They offer a stated return, and a promise to use the proceeds to finance or refinance, in part or fully, new or existing sustainable projects.
Generally, green bonds fund environmental, social and governance improvements or projects, and are issued by the public, private or multilateral entities to finance projects related to a more sustainable economy and that generate identifiable climate, environmental or other benefits [2].
Sustainability-linked financing and green bonds support mining projects by providing capital tied to achieving environmental, social, and governance (ESG) targets, thereby incentivizing sustainable practices and decarbonization.
Sustainability-linked financing in mining
Sustainability-linked financing (SLF), including sustainability-linked loans, offers mining companies financial incentives such as lower interest rates when they meet predefined ESG performance targets like reducing greenhouse gas emissions or improving community relations. These loans do not restrict the use of proceeds but link the cost of capital directly to sustainability outcomes, motivating companies to adopt cleaner, more responsible mining operations. SLF can broaden access to capital from investors who prioritize ESG credentials, including impact investors and development finance institutions.
Role of green bonds
Green bonds are debt instruments designated to fund environmentally beneficial projects within mining operations, such as renewable energy installations, water conservation, or pollution reduction initiatives. They provide a transparent way for mining firms to raise capital specifically for green projects, attracting investors who want assurance that their funds contribute to climate mitigation and sustainability. Green bonds also help mining companies diversify their financing sources beyond traditional equity and bank loans, supporting the transition to sustainable mining.
Impact on mining projects
By linking capital cost and access to financing with sustainability performance, these financial tools help mining projects:
- Reduce environmental impacts such as carbon emissions and water usage
- Enhance social license to operate by improving community and governance practices
- Attract new pools of capital increasingly focused on ESG compliance
- Accelerate the adoption of low-carbon and clean technologies, contributing to the energy transition in mining.
In summary, sustainability-linked financing and green bonds serve as powerful enablers for mining projects to achieve sustainability goals while securing favourable and diversified financing aligned with the global ESG investment trend.
Reference
[1] “emcompass-note-110-sustainability-linked-finance-web.pdf.” Accessed: Sept. 16, 2025. [Online]. Available: https://www.ifc.org/content/dam/ifc/doc/mgrt/emcompass-note-110-sustainability-linked-finance-web.pdf
[2] “About-Green-Bonds.pdf.” Accessed: Sept. 16, 2025. [Online]. Available: https://www.msrb.org/sites/default/files/About-Green-Bonds.pdf
