Why SLLs Have Only Just Begun to Roar

When Enbridge Inc. launched its inaugural C$1 bn Sustainability Linked Loan (SLL) in February 2021, it marked a milestone not only for the company, but also for SLLs as flexible, sector-agnostic lending instruments that allow companies to move the needle in the fight against climate change and meaningful social issues.

Few would have imagined even a year ago how quickly and how broadly appetite would grow for SLLs, which incentivize companies to achieve wide-ranging sustainability goals with financial terms that reward meaningful, predetermined sustainability objectives.

SLLs have taken North America and the world by storm, with over $250 bn announced in the year to date marking 25 percent of sustainable debt issued globally, and the pace is set to accelerate into 2022 and beyond as the transition to a lower-carbon world gains momentum.

These days, SLLs are drawing the attention of not just traditionally green companies and industries, but also those that are historically less green and have ESG-related goals that align with a more sustainable future.

Enbridge is a case in point: barely three months after dipping its toes in the sustainability-linked loan market, the multinational Canadian pipeline company doubled down with a US$1.5 bn Sustainability Linked Bond (SLB) and announced a comprehensive SLB Framework.

Flexible, Industry Agnostic

Appetite for SLLs is growing in lockstep with the realization by companies across sectors that if they invest time and resources into developing a robust sustainability strategy, SLLs can align their borrowing costs directly with those sustainability improvements and sustainability goals.

Today, the financing instrument is a part of nearly every corporate credit/loan conversation with our clients, many of whom have led SLL industry-firsts in North America and the world, beginning with Maple Leaf Foods Inc., which made sustainability history in December 2019 by inking Canada’s first ever SLL.

In the past two months alone, at least four more of our clients have joined those ranks, including Saputo and Sandstorm, which recently became the first North American dairy company and the first North American mining royalty company respectively to enter into SLLs, and TC Transcontinental in September, the first packaging company SLL in the sector. The Sandstorm SLL was quickly followed by another in the space, when Teck Resources Ltd., Canada’s largest diversified mining company, became among the First North American mining producers to have a sustainability linked loan structured with customized Key Performance Indicators related to Climate Action, Gender Diversity and Inclusion, and Health and Safety.

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