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01 February 2024

Austria's sustainability-linked bond market: a snapshot

In 2023 we advised a client in connection with the issuance of the first sustainability-linked bond by an Austrian corporation placed among international institutional investors as well as Austrian retail investors. Its main feature is that the coupon for the last year of the term will increase if one or both predefined step-up events linked to the issuer's sustainability targets occur.

Gearing up for the sustainability-linked bond transaction

Generally speaking, sustainability-linked bonds are bonds whose financial and/or structural characteristics vary depending on the achievement by the issuer of predefined sustainability or environmental, social and governance objectives.

Issuers may therefore start by defining their overall sustainability strategy. The second step is choosing specific sustainability targets and selecting the key performance indicators (KPIs) and sustainability performance targets (SPTs). For example, one KPI may be GHG emissions (Scope 1, 2 and/or 3) and the corresponding SPT may be the reduction of these. Another KPI may be revenues from products or services supporting a net zero strategy and the respective SPT to generate a certain percentage of such revenues. Ultimately, these will influence the financial and/or structural features of the bond (e.g. interest payments or the redemption amount).

According to market practice, the issuer must establish a sustainability framework supporting the issuance of, among other things, sustainability-linked bonds comprising the selection of KPIs, the calibration of SPTs, financial characteristics, reporting and verification. A second-party opinion provider appointed by the issuer will then assess the relevance, robustness, reliability and ambition of the selected KPIs and SPTs and confirm the alignment of the framework with, for example, the Sustainability-Linked Bond Principles published in 2023 by the International Capital Market Association and issue its second-party opinion.

Legal highlights to consider

Disclosure in the prospectus

If sustainability-linked bonds are offered to the public or admitted to trading on a regulated market, the issuer must publish a prospectus according to Regulation (EU) 2017/1129, as amended. The sustainability-related information required in the prospectus depends on its materiality to an investor.

In particular, the following sustainability-related disclosure should be included in the prospectus:

  • General: Information about the selected KPIs and SPTs, and information enabling investors to assess the consistency of the KPIs and their associated SPTs with the relevant sector-specific science-based targets (if any) and the issuer's sustainability strategy.
  • Risk factors: Risks that are material and specific to sustainability-linked bonds are, among others, those regarding KPIs and associated SPTs (e.g. risks concerning potential conflicts of interest when such KPIs are selected and monitored) as well as the impact of the issuer's overall company-level sustainability performance on the bonds.
  • Reasons for the offer and impact on the issuer: Issuers who do not intend to use the offer proceeds for a specified sustainability project but for general corporate purposes should disclose the rationale for the issuance as well as its impact on the issuer in the prospectus.
  • Information concerning the sustainability-linked bonds: If interest payments are influenced by the fulfilment or failure to fulfil sustainability objectives, the way interest payments are calculated in this context (i.e. the reference to the selected KPIs as well as SPTs). If advanced amortisation may occur, any impact this may have on the sustainability performance of the bonds.
  • Additional information: If issuers indicate that any advice or assurance has been provided by advisors or third parties about the sustainability characteristics of the selected KPIs, the prospectus should contain a disclosure concerning the scope of those assurances and who provided them.
  • Post-issuance information: Whether the issuer intends to provide post-issuance information, an indication of what information will be reported and where it can be obtained (e.g. URL to the website).

In addition, material sustainability-related disclosure in any advertisement of the bonds must also be included and consistent with the information in the prospectus.


Another point to consider when offering sustainability-linked bonds to retail investors is whether they are considered packaged retail investment products according to Regulation (EU) No 1286/2014, as amended (PRIIPs Regulation). A packaged retail investment product is an investment where, regardless of legal form, the amount repayable to the retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets that are not directly purchased by the retail investor.

While the views of the various national competent authorities in the EU may vary, in Austria, sustainability-linked bonds are considered packaged retail investment products. Therefore, a key information document must be drawn up for the respective bonds in accordance with the PRIIPs Regulation and must be duly published on the issuer's website before the bonds are made available to retail investors in Austria.

authors: Christoph Moser, Angelika Fischer