The Green Promise – Contract Law and Sustainable Purpose Bonds

Abstract

In order to mitigate climate change, monumental investments are required
in the transformation into a sustainable economy. The financial markets play
a crucial role in funding the necessary investments in new technology and
infrastructure.1 This entails, among other things, an increased focus on the
potential of green loans and bonds. A green loan or bond is a debt instrument
where the borrower undertakes to apply the borrowed money for environmentally
beneficial purposes. But how should one understand that “green”
element of a bond in a Swedish contract law context? There is no prevailing
view today of what happens if a borrower fails to apply the borrowed funds
for green purposes, or if its green activities turn out to be unsuccessful.