Are sustainability-linked loans designed to effectively incentivize corporate sustainability? A framework for review

Alix Auzepy, Christina Bannier and Fabio Martin

No 688, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: The issuance of sustainability-linked loans (SLLs) has grown exponentially in recent years. Using a scoring methodology, we examine the underlying key performance indicators of a large sample of SLLs and analyze whether their design creates effective incentives for improving corporate sustainability performance. We demonstrate that the majority of loans fails to meet key requirements that would make them credible instruments for generating effective sustainability incentives. These findings call into question the actual sustainability impact that may be achieved through the issuance of ESG-linked debt.

Keywords: Sustainability-Linked Loans; sustainability KPIs; ESG lending; ESG loans; sustainable finance (search for similar items in EconPapers)
JEL-codes: G21 G32 M14 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cfn and nep-env
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Citations: View citations in EconPapers (2)

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Journal Article: Are sustainability‐linked loans designed to effectively incentivize corporate sustainability? A framework for review (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:688

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