Which of the following statements best describes a green bond?

Question

BlackTom AI · Accepted Answer

The question asks: Which of the following statements best describes a green bond?

Because the provided answer options are not included, we cannot review each alternative. However, we can analyze the given correct option in isolation and explain why it accurately describes a green bond, while also noting the limitation posed by the missing competing statements.

Option presented as correct: 'Bonds that finance green projects.' This is a precise and commonly accepted description of green bonds. Green bonds are debt instruments whose proceeds are exclusively used to fund or refinance projects with environmental benefits, such as renewable energy, energy efficiency, clean transportation, and climate adaptation initiatives. The key feature is the earmarking of proceeds for green objectives, which aligns with standard definitions from many market frameworks.

Why this description is correct:
- It captures the core purpose of the instrument: funding projects with environmental benefits.
- It distinguishes green bonds from other types of debt by the intended use of proceeds.
- It implicitly references the sustainability framework that underpins green finance, even though it does not enumerate all eligible project categories.

Why alternative statements (hypothetical) would be incorrect, in general, if they existed:
- Any statement claiming green bonds fund non-environmental projects would be inaccurate, as the defining feature is environmental benefits.
- A statement suggesting that proceeds are not specifically tracked or restricted to green projects would undermine the fundamental purpose and risk misrepresent the instrument.
- If a statement claimed green bonds are identical to standard corporate bonds without any use-of-proceeds requirement, it would ignore the environmental use-of-proceeds framework.

Note: To perform a complete option-by-option analysis, the actual list of answer choices is needed. Without the other options, we cannot compare relative correctness or identify any distractors. If you can provide the missing answer options, I can deliver a full, itemized evaluation of each choice.

FINA3401.13791.202610 Practice Ch. 7 Quiz

Which of the following statements best describes a green bond?

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