Sustainability-linked finance (SLF) is a powerful tool for mobilizing capital as the world moves towards a greener global future. SLF incentivizes companies to pursue ambitious, long-term environmental and social goals, and its use can help countries achieve the 2030 UN Sustainable Development Goals. Companies in nearly all industries and locations can make use of sustainability-linked finance. However, 95% of SLF issuances have taken place in high income countries. In 2021, SLF issuance in emerging markets saw a 386% increase compared to 2020 volumes. Emerging markets constitute an enormous opportunity for important SLF projects.

Sustainability-linked finance achieves its impact by tying pricing to the achievement of measurable goals, usually through interest rate step-ups or step-downs. Over $876 billion of SLF has been brought to market since 2017, and its rapid growth reflects strong interest on the part of borrowers, investors and regulators. Sustainability-linked loans have been the most popular SLF instrument to date. However, issuances of sustainability-linked bonds have skyrocketed in the past year.

IFC has unrivalled expertise in managing and measuring environmental and social issues in emerging markets. IFC’s SLF offering goes well beyond structuring transactions and providing financing. IFC collaborates with borrowers at the earliest stages of a project, offering strategic support which continues through the implementation phase. At IFC, each SLF project is assigned a dedicated Sustainability Coordinator, who works with the company to ensure that targets are ambitious in relation to both past performance and industry standards. The Sustainability Coordinator also ensures that the project’s social and environmental goals are aligned with the standards of the Paris Agreement, which protects clients from unwanted accusations of “greenwashing” and moves each project’s host country closer to the attainment of sustainable development goals.