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ESG

Sustainability-linked products forge path to fully sustainable finance

Volumes of sustainability-linked bonds are predicted to increase during the next year. The model, combined with developing data and disclosures, could help embed sustainability across finance.

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Sustainability-linked products could be the key to mainstreaming sustainable finance.

This year has seen an increase in sustainability-linked bonds, and the sustainability-linked loans market continues to grow.

Bloomberg New Energy Finance records 13 sustainability-linked bonds issued up to the end of October this year, along with 103 sustainability-linked loans.

That issuance has continued into November, when LafargeHolcim became the first issuer from the building materials industry to issue a sustainability-linked bond. Mid-month, it launched a €850 million deal tied to CO2 reduction.

These products originate from the outcomes-based model of social impact bonds.

In 2016, the idea of key performance indicators (KPIs) was woven into supply chain financing at Puma. The sports brand partnered with the International Finance Corporation (IFC) to offer financial incentives for its emerging-market suppliers to improve environmental, health and safety, and social standards.

It seems a bit of dream at present, but … it will only be a matter of time
Ana Carolina Oliveira, ING
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Then in 2017, the first sustainability-linked loan was issued by Philips – the first deal in the syndicated loan market where the pricing was linked to a Sustainalytics rating.

In