Catalysing change across an issuer’s operations
With the introduction of sustainability-linked bonds in the Singapore corporate credit market, we discuss what these are and what investors should look out for
THE Singdollar corporate credit market saw the first sustainability-linked bond (SLB) priced in February 2021 where the issuer raised S$250 million. Since then, there have been four more SLB issuances, raising a total of S$1.8 billion.
SLBs are intended to encourage issuers to modify their behaviour. These instruments are structurally linked to the issuer’s sustainability targets, expressed through key performance indicators (termed sustainability performance targets, SPTs) which are measurable and trackable.
If structured appropriately, SPTs should catalyse change across the issuer’s entire operations. SLBs are structured with a carrot and/or a stick where issuers enjoy cost savings for meeting the targets and/or bear a higher funding cost if targets are unmet within a specified timeframe.
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