Sustainability-linked derivatives

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

• Corporate social responsibility
• CO2
• Decarbonise
• Derivative
• Emissions
• Environmental, social and governance (ESG)
• Foreign exchange risk
• Green bond
• Green Bond Principles (GBP)
• Key performance indicator (KPI)
• Social bond
• Social impact bond
• Sustainability
• Sustainability bond
• Sustainability Bond Guidelines (SBP)
• Sustainability-linked bond (SLB)
• Sustainability-Linked Loan Principles (SLLP)
• Sustainability performance target
• Use of proceeds bond