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

  • 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.

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Author:Alix AuzepyORCiD, Christina E. BannierORCiDGND, Fabio Martin
URN:urn:nbn:de:hebis:30:3-681448
URL:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4361732
DOI:https://doi.org/10.2139/ssrn.4361732
Series (Serial Number):CFS working paper series (No. 688)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Date of Publication (online):2023/02/22
Date of first Publication:2023/02/22
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2023/02/27
Tag:ESG lending; ESG loans; Sustainability-Linked Loans; sustainability KPIs; sustainable finance
Page Number:47
HeBIS-PPN:506680460
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:G Financial Economics / G2 Financial Institutions and Services / G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G Financial Economics / G3 Corporate Finance and Governance / G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
M Business Administration and Business Economics; Marketing; Accounting / M1 Business Administration / M14 Corporate Culture; Social Responsibility
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht