October 05, 2020

Green Loans and Multinational Corporations: Financial Innovation to Deliver Sustainability

Thomas M. Kerr and Francisco Avendano

At the time of writing this article, the world faces the disruptive COVID-19 pandemic, with unprecedented consequences on people, businesses, and markets. Without urgent economic stabilization measures and liquidity support, many businesses will fail—with catastrophic consequences, especially in the poorest countries. While we respond to the pandemic, we cannot ignore another looming multi-trillion-dollar crisis: climate change. The world needs to respond to both the pandemic and climate change by rebuilding economies to be more sustainable and resilient. To get on this resilient path, companies need to allocate proceeds into assets and activities that deliver sustainable and measurable outcomes. This is precisely the ethos of green loans. This article highlights the market developments that have helped green loans gain acceptance, features select green loan transaction examples, and concludes with an assessment of what is needed to further scale up and replicate the early success of green loans to help companies achieve strong environmental performance.

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