By Joshua Neil
Copyright edie
SLBs are loans where the rate of interest which a borrower must pay varies based on whether they meet certain preset sustainability KPI.
The proportion of SLBs on track to deliver their stated Yield to Maturity has risen quarter-on-quarter, from 68% to 74%.
The quarterly report also highlights the strategic importance of flexible and cost-effective corporate transformation pathways, with a particular focus on hard-to-abate industries, in scaling SLBs.
According to SEB Group, while global issuance of SLBs fell to €48.6bn in Q2 2025, well below the €122bn peak in 2022, more borrowers are meeting their KPIs than in previous years.
Around 53% of outstanding SLBs carry a 25-basis point penalty for missed targets, underscoring the role of financial incentives in driving accountability.
Sustainable finance outlook
According to the report, the first eight months of 2025 saw the sustainable finance market as a whole reaching $1.45tn in new issuances, a 2.7% year-on-year decline. Notably, issuance from hard-to-abate industries is increasing, with China, the EU and South Korea driving activity.
The report also sets out the implications of recent US policy changes. The One Big Beautiful Bill Act in the US, and new tariffs overseen by Donald Trump are expected to impede clean energy deployment, cutting an estimated 23% of planned solar and wind capacity by 2035. By reducing key tax credits and favouring fossil fuel investment, the legislation risks deterring clean tech manufacturing and reinforcing the US’s dependence on Chinese supply chains.
Against this backdrop, SEB Group pointed to tools such as marginal abatement cost curves (MACCs) as critical for guiding business decision-making. These rank decarbonisation measures according to cost and emissions impact, aiding companies – particularly in sectors like steel and capital goods – plan flexible and cost-efficient pathways to net-zero.
A sustainability-linked finance rebound
Sustainable funds such as SLBs have seen a recent rebound as European investment interest rises, with a net inflow to ESG funds of $4.9bn in the second quarter of 2025, against the $11.8bn in outflows during the first quarter of the year.
This comes as US investors continue to leave the space, withdrawing $5.7bn in the 11th consecutive quarter of outflows in that region. Despite these outflows, a record $386bn was invested in renewables in the first half of 2025 globally, up 10% year on year, according to BloombergNEF.
