Sustainability-Linked Loans (“SLL”) have now emerged as one of the important types of sustainable financings
Image: Shutterstock
The global sustainable debt issuance set a record of surpassing $1.6 trillion in 2021 and exceeded $700 billion during the first half of 2022. Corporations are leveraging sustainability-linked finance instruments to further their Environmental, Social, and Governance (ESG) agenda, reduce the cost of borrowing, and diversify the lender base.
Sustainability-Linked Loans (“SLL”) have now emerged as one of the important types of sustainable financings. Despite a mere 4-year track record, SLLs have shown the strongest growth among various sustainable debt issuances. Starting with $49 billion in 2018, SLLs have crossed $350 billion in the first half of 2021—with 614 percent growth (Figure 1). So, it has now become imperative that all CFOs and Treasurers understand SLLs.Figure 1: Annual Sustainable Finance Growth (USD$ billion), 2013-2021
Source: BloombergNEF, Bloomberg L. P.
[This article has been reproduced with permission from SP Jain Institute of Management & Research, Mumbai. Views expressed by authors are personal.]