The Bank: Green- and ESG-based Lending

Bankers are issuing green loans as well as sustainability-linked financing to incentivize borrowers to operate with a lower carbon footprint.

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Michelle Thompson, Contributing Editor

As uptake of reducing carbon emissions grows, some lenders are further incentivizing it with green and sustainability-linked loans (SLL) that come with a rate discount.

Throughout the U.S., loans related to environmental targets—and, at times, social and governance metrics—grew by about $52 billion in 2021, representing a staggering 292% year-over-year increase, according to Bloomberg data.

And earlier in 2021, Bank of America (BofA) said it would deploy $1 trillion by 2030 to expedite a transition to a lower-carbon economy.

“We will meet our commitment by working with clients to provide lending, capital-raising, advisory and investment services, and to develop financial solutions and drive innovation to ensure the transition to a sustainable economy,” BofA vice chairman Anne Finucane, who leads its ESG efforts, said in a statement.

Some banks have launched “green energy desks” to lend—with ESG strings attached.

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