A growing trend can be seen with companies linking their loans to sustainability measures. Earlier this month, WSP, a medium-sized Canadian consultancy amended its loan terms in an unusual manner, where the interest rate charged depends on the achievement of sustainability targets such as reducing greenhouse gas emissions from operations, increasing revenues from green sources, and raising the share of women in management. For every goal the company meets or misses, its interest payments will fall or rise by a set amount. This is just one example. Sustainability linked loans are booming and now account for 1/4 of green debt issuance.
However, whilst the intention behind the loans is for companies to do good, greenwashing and reliability of data can be a worry. So it is important for regulators to start taking notice and set the standards now before the trend hits the mainstream.