Which of the following best describes a green bond?

A green bond is best described as a fixed-income instrument specifically designed for funding projects that have positive environmental impacts. This type of bond raises capital for initiatives such as renewable energy, energy efficiency, clean transportation, sustainable water management, and other environmental projects. Investors in green bonds are motivated not only by financial returns but also by the desire to support environmentally beneficial activities.

The focus on environmental sustainability differentiates green bonds from other fixed-income securities, which may not have a specific use of proceeds tied to environmental benefits. This distinction underscores the unique role of green bonds in the broader landscape of sustainable finance and investment. Overall, green bonds align the financing needs of environmentally impactful projects with the investment objectives of socially responsible investors, making them an important tool in the transition to a more sustainable economy.