Sustainability-Linked Loans for EV Manufacturers: An Emerging Trend in Banking

Purpose—This study explores the impact of sustainability-linked loans (SLLs) on the electric vehicle (EV) manufacturing sector and examines how these loans influence environmental and social governance (ESG) practices and support sustainability in banking. Design/Methodology: Qualitative analysis has established an award trend in finance within the automotive sector. Industry reports and case studies on banks’ pioneering SLLs for EV manufacturers are reviewed. This provides insight into the vital aspects of loan structures, key performance indicators (KPIs), and regulatory frameworks. Findings ̶ EV manufacturers are motivated to enhance sustainability by having SLLs, often with the financial advantage of achieving ESH. It has been proven that these loans have benefited manufacturers by bringing financial incentives with sustainability goals into line, which eventually contributes to the transition to a green economy. Research limitations ̶ This study relies primarily on qualitative case analysis, so the findings might not be generalizable. Further quantitative research will be necessary to measure the direct impact of SLLs on the financial performance of EV manufacturers. Practical implications ̶ The paper underscores the importance of SLLs in helping EV manufacturers meet sustainability targets, offering a framework for other industries seeking similar incentives. Banks can adopt these practices to attract environmentally responsible investments. Originality/value ̶ This paper focuses on SLLs in the EV sector. Therefore, it provides industry-specific insights into sustainable finance’s role in supporting the green transition and offers valuable implications for policymakers and industry stakeholders.