# Sustainability-Linked Loan

*ESG & Sustainable Finance — Finicade finance glossary*

A sustainability-linked instrument ties the interest rate to the borrower hitting sustainability targets, rather than restricting how the money is spent. That makes it usable by any company, including heavy emitters that most need to transition. Its weakness is target calibration: penalties are often small and targets sometimes set at business-as-usual, which converts the structure into a discount for doing nothing new.

**Also known as:** SLL, sustainability-linked bond, KPI-linked debt

**Related terms:** [Green Bond](https://finicade.com/glossary/green-bond), [Covenant](https://finicade.com/glossary/covenant), [Transition Finance](https://finicade.com/glossary/transition-finance), [Greenwashing](https://finicade.com/glossary/greenwashing), [Net Zero](https://finicade.com/glossary/net-zero)

Source: https://finicade.com/glossary/sustainability-linked-loan