TUI’s New Climate Bonds: Environmental Progress or Greenwashing?

In February, TUI, one of the world’s largest tourism businesses, announced it would be offering sustainability-linked bonds.

TUI’s promise to investors: Loan us money, we’ll pay it back at a competitive interest rate and hit a stated ESG goal for lowering emissions. If we miss the goal, that interest rate goes up and you make more money.

The company hoped to sell about $318 million worth of the bonds, but there was plenty of demand and the total value hit $530 million. 

Why It Matters

On paper, it seems like a win all around. For TUI, for investors, and for the environment. 

But it’s not that simple. Sustainability-linked bonds are a new instrument and they haven’t been fully tested. There are still questions about how these goals are measured and regulated. In TUI’s case, scientists say that the goals will be tough to meet by its deadline.  

“When they came out, I was thinking, Oh here goes another greenwashing episode of sustainable investing coming down the pike,” said Leslie Samuelrich, the president of Green Century Funds, an environmental mutual fund that helps investors make sustainable financial decisions. 

Environmental and social bonds have surged in recent years, with sales hitting more than $1 trillion dollars in 2023. Sustainability-linked bonds are one of four types, and they make up the smallest percentage of that total. In 2023, they had the largest decrease in sales volumes, down 22% to just $68 billion. 

Because SLBs are still in their infancy, there isn’t a track for how effective these bonds are, how effective they will be, or how many companies reach their targets.

“This is a very new market,” said Alan Xiangrui Meng, the sustainable fixed-income research lead at the London Stock Exchange Group. “The first one was only issued in 2019, so 2025 is the year that SLBs will be tested.”

What Are Sustainability-Linked Bonds? 

Sustainabi