Posted 3/3/2024, 1:30:00 PM
Sustainability-Linked Loan Issuance Plunges as Regulations and Scrutiny Increase Costs
- Issuance of sustainability-linked loans plunged 56% in 2022 to $203 billion as regulatory requirements increased and financial incentives decreased
- Issuance has continued falling in 2023, down 74% so far this year, while green loan issuance has rebounded
- Stricter EU regulations on documenting ESG claims and risk of greenwashing accusations are making companies wary of sustainability-linked loans
- The "greenium" that borrowers once enjoyed with these loans has evaporated due to required auditing costs
- Some borrowers are not converting regular loans to sustainability-linked loans as previously agreed due to higher associated costs and scrutiny