Sustainability-Linked Loan Financing Bonds: Growth, Economics & Barriers
Sustainability-linked loans (SLLs) have become a key instrument in financing transition initiatives in financial services, particularly in hard-to-abate sectors that cannot solely focus on green projects. As banks seek to meet their emissions-reduction commitments, directing financing to green projects will not be sufficient. According to Environmental Finance Data, SLLs are the most common sustainable lending arrangements made by banks.
In this paper, ISS-Corporate draws on interviews with market participants, issuers, investors, market associations and sustainable finance researchers to provide a comprehensive overview of this new instrument. The paper explores the main motivations behind the creation of SLLBs, their benefits, and the opportunities and challenges they present for future developments.