The loan is of a five-year tenor, and is called as a sustainability-linked loan (SLL), wherein progress on carbon emission targets will determine the costs, according to a statement.
By linking funding to environmental goals, Tata Communications aims to be Net Zero across its global operations by 2035. This innovative financing model sets a benchmark for other companies to integrate sustainability into their financial strategies.
Tata Communications aims to achieve Net Zero carbon emissions across its global operations by 2035. This ambitious goal reflects the company's commitment to sustainability and aligns with the recently secured $250 million sustainability-linked loan. By linking funding to environmental performance, Tata Communications is taking proactive steps toward a greener future
The loan is a sustainability-linked loan, which means the interest rate margin adjusts based on the company's progress toward specific sustainability targets. As Tata Communications makes progress in reducing its carbon footprint, the interest rate on the loan may decrease. Conversely, if the company falls short of its goals, the interest rate could increase.
This financing model sets a benchmark for other companies, encouraging them to integrate sustainability into their financial strategies.
The adoption of sustainability-linked loans (SLLs) is a growing trend among companies, where they are held financially accountable for their environmental impact. Stora Enso, Indorama Ventures, DSM, and Solvay are few of the industrial companies that have also embraced sustainability-linked loans. By linking funding to environmental performance, they incentivize short-term carbon emission reduction targets, aligning their financial strategies with long-term sustainability commitments.
SLLs help reduce emissions and drive significant environmental benefits as well as reshape how companies approach finance, ensuring it aligns with sustainability goals. SLLs are gaining popularity across sectors, reaching even hard-to-abate industries.
Green and sustainability-linked loans are recognized products globally, reflecting a shift from voluntary approaches to addressing climate change risks to more regulated practices.
In a nutshell, SLLs are a powerful tool for companies to integrate sustainability into their financial strategies, fostering a greener and more responsible future.
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