Sustainability-linked derivatives

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Sustainability - sustainability-linked contracts - derivatives.

(SLD).

A sustainability-linked derivative is a derivative contract incorporating payment cashflows referenced to key performance indicators (KPIs) measuring environmental, social and governance performance against pre-agreed targets (ESG targets).


"Lloyds Bank has also helped to further the development of the sustainability-linked derivatives market, with a sustainability-linked foreign exchange transaction that supports UK leisure travel company Jet2’s decarbonisation ambitions.

For Jet2, the SLDs enable it to mitigate FX risk from operations – just like a standard derivative – while gaining pricing benefits as long as it delivers on its ESG goal of reducing CO2 emissions per passenger-kilometre travelled."

The Treasurer, December 2023, Issue 4, p41.


See also