Loans linked to sustainability have emerged as an alternative to traditional ESG debt and have eclipsed green loans and bonds as a primary mode of financing globally, according to a new analysis from S&P Global Market Intelligence.
The European Union has embraced the product, which gives companies a discounted rate for meeting tailored sustainability targets. Loans linked to sustainability increased dramatically in the European leveraged loan market in the first half of this year, according to S&P Global, and will likely break in among mid-cap companies and small and medium-sized firms.
The product does not carry restrictions on use of proceeds, unlike green debt.
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