Bonds whose performance is linked to achieving (or contributing to) certain SDG related outcomes or targets, such that failing to meet those outcomes or targets results in a pre-specified cause of action (e.g. a step-up/step-down in the margin required to be paid on the bond if impact performance is lower/higher than a pre- specified target). Note: Paying a step-up margin to investors where target outcomes are not achieved is not a well-aligned incentive. Directing any step-up margin to a separate account to be paid, for instance, to a third-party organization and applied towards improving the targeted outcomes could be more appropriate.

United Nations Development Programme. (2021). SDG Impact Standards Glossary. https://sdgimpact.undp.org/assets/SDG-Impact-Standards-Glossary.pdf