From what I’ve seen so far, the few and highly-publicized environmental impact bonds (EIBs) completed recently really allocate most risks to the funding source (the issuer), not the investor. When the press release smoke clears, the EIBs are pretty much high-credit quality loans with a lot of interesting packaging.

Below is a chart I sketched out for another project that shows where they might fit on a spectrum of various types of ESG project capital types. The EIBs are all in the upper left quadrant — in contrast to investors who take real risk on unproven green tech (lower right) or even project finance non-recourse lenders in renewable energy deals (in the middle).

To be fair, EIBs are still very much in the small bench prototype stage. At the least they need to get a lot of bigger. Since publicity value doesn’t really increase with size, they’ll need to develop more substantive features (something that larger size also makes more worthwhile). My guess is that their development path will lead to about the middle of risk allocation — in effect, a kind of specialized project finance — which is not a bad market precedent.