Despite the market volatility due to COVID-19, the sustainable finance market has seen rapid growth in the last two years. Sustainable debt issuance set a record in 2021, surpassing US$1.6 trillion.1 Even in the face of broader market forces, which contributed to a decline in the volume of issuances in the first part of 2022, the total outstanding value of the sustainable finance market continues to rise.2
With the market rapidly expanding, there are also growing expectations for transparency around key performance indicators (KPIs) and associated sustainability performance targets (SPTs) of sustainability-linked finance instruments.
The Growing Importance of KPIs and SPTs
What’s Next in the Evolution of Sustainability-Linked Instruments
- SLBs and SLLs are flexible and can be used for general corporate purposes.
- Sustainability-linked finance instruments offer companies a good avenue to communicate their sustainability commitments to the market.
- Investors are continuing to demand more information on material ESG issues.
1 BloombergNEF. 2022. “1H 2022 Sustainable Finance Market Outlook.” January 24, 2022. https://about.bnef.com/blog/1h-2022-sustainable-finance-market-outlook/.
2 Natixis. 2022. “Green Bonds Review 2Q22: The green and sustainable bond market starts to mature.” April 28, 2022. https://home.cib.natixis.com/articles/green-bonds-review-2q22-the-green-sustainable-bond-market-starts-to-mature.
3 TDC Net. 2022. Sustainability-Linked Finance Framework. https://tdcnet.dk/media/yflpkwgr/tdc-net-sustainability-linked-finance-framework.pdf.
4 Nauman, B. 2020. “Green loans catch on in push for companies to clean up.” January 20, 2020. Financial Times. https://www.ft.com/content/d649cf78-35f8-11ea-a6d3-9a26f8c3cba4.
5 Environmental Finance. 2022. “Sustainability-linked Debt – Carbon Emissions KPIs.” July 11, 2022. https://www.environmental-finance.com/content/downloads/sustainability-linked-debt-carbon-emissions-kpis.html.6 Low base effect is the tendency for a small absolute change from a low initial amount to be translated into a large percentage.
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