HSBC Bank USA announced today the launch of sustainability-linked loans (SLL) for commercial banking clients, enabling U.S. businesses to tie their borrowing costs to their progress on achieving sustainability goals.
Sustainability linked securities and loans are an emerging form of sustainable finance, with attributes including interest payments tied to an issuer’s achievement of key performance indicators (KPIs) and associated sustainability performance targets (SPTs). Examples of SPTs include greenhouse gas emissions reduction, use of renewable energy, diversion of waste from landfills and reduced water use, as well as social and diversity metrics like increased workforce diversity.
The market for sustainability-linked debt is currently experiencing rapid growth, with a recent report from Moody’s Investor Service revealing that global sustainability-linked loans reached $97 billion in the first quarter of 2021, up 29% over the prior quarter.
For the new offering, HSCB structures SLLs in accordance with the Sustainability Linked Loan Principles, which are voluntary global guidelines set by the independent Loan Market Associations. The principles ensure that SPTs are meaningful and ambitious for the business, and that performance is verified and reported regularly.
Julie Bennett, Americas Head of the ESG and Strategic Solutions Group, HSBC Global Banking, said:
“We want to provide loans and access to credit in ways that meet the needs of American businesses, from financing growth and investment to support their sustainability strategy. SLLs are another example of how we are embedding sustainability into our products and services, including access to capital markets, lending, transaction banking and advisory services.”