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Climate And Environmental Governance: Raising the bar for sustainability-linked loans

The Edge Markets, Edge Weekly

Sustainability-linked lending, where the terms of loans are linked to environmental targets, is catching on fast. The volume of these loans surged more than 300% in 2021 to hit a record US$717 billion, according to Refinitiv data, with increased activity coming from every region and every industry.

This kind of rapid growth has justifiably raised excitement around the role of sustainability-linked loans (SLLs) in the transition to a low-carbon world. As the market deepens, however, it is crucial that participants remain focused on quality. Lenders will always compete to offer attractive borrowers the best terms, but they should resist the temptation to go soft on sustainability goals. That risks undermining the value of the product to all involved — and to the climate.


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