Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test 2026 - Free CESGA Practice Questions and Study Guide

A green bond is primarily recognized as a fixed-income instrument designed specifically to fund projects that have positive environmental impacts, such as climate change mitigation, renewable energy, and sustainable development initiatives. These bonds are used to raise capital for projects that contribute to addressing various environmental issues, aligning financial investments with ecological sustainability.

The core purpose of a green bond is to provide investors with a way to contribute to environmentally beneficial projects while earning a return on their investment. They come with the same security and structure as traditional bonds, but the proceeds are earmarked exclusively for designated green projects. This makes it an attractive option for investors who are looking to promote sustainability without giving up the financial benefits typically associated with bonds.

The other options describe different characteristics of bonds but do not capture the specific essence of what defines a green bond. For example, while a bond may have a lower interest rate, this does not inherently relate to the environmental objectives tied to green bonds. Additionally, while some green bonds may be issued by governments, they can also be issued by corporations and other entities, making it misleading to suggest that they are exclusively government-issued. Lastly, green bonds are not limited to investing in renewable energy; they can finance a wide array of projects aimed at reducing environmental impacts, not solely