First pay-for-performance environmental bond reviewed

Author: IFLR Correspondent | Published: 26 Sep 2016

Shakespeare's Juliet may not have ascribed great significance to a name but for securities lawyers and market participants alike there is significance to nomenclature. Social impact bonds, or investments that are intended to provide funding to achieve a particular environmental or social impact, have not, to date, been structured as debt securities or "bonds". Also, many so-called social impact bonds may not be structured in a manner designed to link financial returns and the achievement of observable impact milestones or results. We advise NPX, LLC which has developed the proprietary Impact Security, a debt security that incorporates pay-for-performance elements in order to expressly condition payments on the attainment of specified metrics. Impact Securities differ from green bonds, which are "use of proceeds" bonds wherein the issuer of the bond commits to deploy the proceeds of the bond issuance to fund certain environmental projects. Instead, payments to holders of Impact Securities...