IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03692220.html
   My bibliography  Save this paper

Sustainability Linked Loans

Author

Listed:
  • Diana Pop

    (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement)

  • Vladimir Atanasov

    (WM - College of William and Mary [Williamsburg])

Abstract

This study examines a novel form of debt financing – sustainability linked loans (SLL). SLLs are obtained by companies committed to sustainable growth in line with climate change goals. Compared to funding from most traditional green instruments, which is restricted to specific projects, SLL funds can be used for general corporate purposes, but the interest rate on the loan is linked to certain Environmental, Social, or Governance (ESG) metrics. The typical SLL credit spread is reduced by 2 to 25 basis points if custom ESG targets are met. We show that despite a negative market reaction to the announcement and activation of SSLs, SLL funding helped issuing companies better withstand the liquidity shock caused by the COVID-19 pandemic. SLL issuers outperformed their peers around a series of pandemic-related events. Our study also provides causal evidence that meeting non-financial performance targets can directly affect market valuation, beyond securing access to liquidity on the credit market.

Suggested Citation

  • Diana Pop & Vladimir Atanasov, 2021. "Sustainability Linked Loans," Post-Print hal-03692220, HAL.
    • Handle: RePEc:hal:journl:hal-03692220
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-03692220. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.