Sustainability-linked debt rising as new asset class: S&P

Singapore, April 30 : The issuance of sustainability-linked debt instruments will top 200 billion dollars this year due to burgeoning sustainability-linked loan market and growing popularity of sustainability-linked bonds, according to a report published on Friday by S&P Global.
It said the pool of companies that can obtain sustainable financing is expanding quickly to include issuers who may not have sufficient capital expenditures directly related to sustainability projects, are just beginning their sustainability journeys, or are in transition and hard-to-abate sectors.
Additionally, banks are bolstering growth of the sustainability-linked instrument market as they address corporate objectives to increase the share of impact financing within their lending books.
"The sustainability-linked concept will likely expand beyond the classic sustainability-linked loan or sustainability-linked bond structures into other instrument types including the newly developed sustainability-linked green bond that combines use of proceeds and sustainability-linked bond models," said S&P Global Ratings sustainable finance analyst Lori Shapiro.
Companies are using sustainability-linked instruments to fund a variety of innovative environmental technologies, she said.
The need for transparency and effective sustainability-related disclosure practices to avoid 'ESG-washing' is crucial to expanding the practice of linking loan and bond pricing to environmental, social, and governance (ESG) performance, said the S&P report.