A growing number of borrowers in Asia Pacific

News

  • News
  • 24 Dec 2020
    • Share

More APAC Firms Tap Loans Linking Rates to Sustainable Goals

A growing number of borrowers in Asia Pacific are getting loans whose interest rates are linked to meeting sustainability goals, in one of the few bright spots for a corporate lending market depressed by the pandemic. The market for so-called sustainability-linked loans in Asia Pacific excluding Japan took off in 2017, and borrowers have steadily increased since then: 18 firms signed a total of US$7.4 billion of such debt so far in 2020, compared with 16 companies raising US$7.5 billion last year, according to data compiled by Bloomberg. Margins on the debt rise when a borrower misses green or social targets. Loans overall in the region have plunged 30% this year as the pandemic made banks more reluctant to lend. Rising interest in sustainability-linked loans comes as demand jumps for similar bonds that reward borrowers that achieve targets such as greenhouse gas emissions and employee training: global sales of such notes have surged almost 80% this year. But some investors have questioned whether putting money in those vehicles is all that ethical considering that debtholders are in effect rewarded when the borrower misses sustainability targets.

Posted by

The Edge Markets