Advisory support for the design of a sustainability-linked loan portfolio

THE BACKGROUND

The sustainability-linked loan (SLL) market is growing. According to Bloomberg, in 2020, the market was valued at approximately USD120 billion and reached about USD350 billion in 2021. As of 2023, the size of the global SLL market was estimated to be between USD600 billion and USD700 billion. Europe has led the market, driven by strong regulatory support and investor demand for sustainable finance.

SLL is a relevant instrument for EIB as it provides a financial incentive to the borrowers to achieve their agreed-upon performance objectives, known as Sustainability Performance Targets (SPTs), such as an improved ESG rating, reduced carbon emissions, or other strategic goals to be measured by specific KPIs.

THE PROJECT

FINANCE FOR IMPACT advised EIB for developing a pipeline of sustainability-linked loans (SLL). SLL is an innovative, promising loan instrument for EIB as it links a borrower’s performance to sustainability issues. Therefore, this instrument has the potential to align well with EU policy objectives (e.g., Green Deal, EU Taxonomy, etc.). When assessing benefits for EIB to develop SLLs, we reviewed opportunities to align to SLL Frameworks, e.g. the Sustainability‐Linked Bond Principles (SLBP) as administered and published by the International Capital Markets Association (ICMA) in June 2022, and the Sustainability-Linked Loan Principles (SLLP) as administered and published by the Loan Market Association (LMA) in March 2023.

THE RESULTS

This information is confidential.