In brief: Sustainability-linked loans need more scrutiny, says Ampega’s Sapra

Sustainability-linked loans should put more on the line for borrowers than 'just losing five basis points', says Ampega Asset Management's Vivek Sapra.

While the rise of sustainability-linked loans may seem like a cause for celebration on the surface, there’s more than meets the eye, our colleagues at affiliate title Infrastructure Investor report.

Vivek Sapra, a senior adviser for infrastructure investments at Ampega Asset Management, said during the Private Debt Forum at the Infrastructure Investor Network Global Summit in Berlin last month: “We look at some of these sustainability developments, we look at KPIs for these transactions where banks have a sustainability co-ordinator – ‘Oh, that’s great.’ But actually, whilst the sustainability co-ordinator comes in and helps [put] the borrower’s papers in place, the role nearly always ends at financial close.

“And so going forward, if [KPIs] are not achieved, what are the consequences?”

In his opinion, the consequences fall on the banks. The reputational hit a bank takes by declassifying a loan far outweighs the financial hit a borrower might take.

“If you’re going to have a sustainability-linked loan, there should be consequences if you don’t meet your KPIs – not just [losing] five basis points,” Sapra said.