Can sustainable companies get a lower cost of capital?
Tuesday, March 12, 2019
By Libby Bernick
Green bonds have been making headlines in the sustainable finance world the past few years because of their rapid growth. Emerging this year as a rising star in sustainable finance are green and sustainability loans. What has caught the eye of corporate finance and treasury departments is that these loans are often tied to a lower lending rate for companies that can improve their performance on sustainability measures.
Sustainability as a path to lower borrowing costs could be a game-changer.
Green- and sustainability-linked loans reached $36.4 billion while green bond issuance topped $182 billion in 2018 according to BNEF. Since Lloyds Bank’s pioneering effort in 2016, with about $1.27 billion earmarked for loans for greener real estate companies in the United Kingdom, other banks have stepped in (including leaders ING Bank and BNP Paribas) and green loans are spreading to many regions and sectors.