DANN The majority of SLBs issued globally to date have environmental targets, most frequently focused on reducing emissions and increasing renewable energy. These areas are already becoming more standardised as a result, which creates greater ability to compare between transactions.

Social targets have been much less frequent in SLBs so far. The majority of investors, corporates and consumers are still more focused on environmental impact, though this is shifting as awareness, measurement and reporting of social indicators increases.

Individual issuers may also want to highlight different things with their transactions. An issuer’s second SLB also might use different targets from its first. For example, it might have an environmentally focused SLB to begin with and a socially focused SLB for its next deal. The focus on materiality should remain.

HANNA Over the last year – and particularly in the last six months – the questions we have been getting from a number of clients that invest with us  have increasingly focused on social aspects such as board members and employment policies. Investors want to see more diversity and this seems to be becoming a hot topic.

We are seeing a lot of headlines about toxic workplace cultures and other social factors. I am surprised we are not seeing more targets like this in transactions.

DANN We are also seeing interest but, when it comes to structuring sustainability-linked transactions, we have to focus on what is most material – which means being selective. Sustainability-linked loans (SLLs) usually have 3-5 metrics built into transactions while SLBs tend to have fewer – perhaps one or two. This requires prioritisation. The social element seems to be coming through much more strongly in SLLs as the larger number of metrics means issuers can cover more bases with a single transaction.

MOTTOLINI Social targets are more relevant for some issuers than others. If we were just a chemical-manufacturing business, the emissions targets would be the most relevant. But we are in the top-three private-sector employers in Australia as well, so social targets for employment are very important to us. Our SLL has a target for employment parity for Aboriginal and Torres Strait Islander people.

We contemplated having a similar target in the SLB, to show our commitment. But as a chemical manufacturer, carbon emissions is the key target for us.

DRYSDALE It is a matter of context and it is also a matter of timing. Funds began focusing on green much earlier than they did on social. We have reached a critical mass in the green space and I think the social side of things is on the same path, just not as far along it.

KWEE Positive impact is not limited to green – we are also very much focused on social goals. But, very generally across the whole investor base, the environment is a global challenge whereas social tends to be more local.

The set of domestic investors that has social opinions is a relatively small cohort. If companies want to issue an Australian dollar transaction that goes into Asia and Europe as well as Australia, they may have greater success at this stage by focusing on their environmental footprint in a sustainability-linked format.

Our feedback to arrangers is not to overcomplicate things for early participation in the market. But it would be great to see environmental and social targets within the same transaction.

BROWN Most investors have shorter timeframes for improvement in indigenous employment or workplace health and safety so they may not feel comfortable having a five-year trigger date for these social targets. They probably fit better into SLL transactions at the moment.

GIFFORD We saw some interesting social transactions throughout COVID-19. These included targets like lending to SMEs. We have also seen regional innovations from banks. For example, there is greater focus on underrepresented communities in North America as a result of the Black Lives Matter movement. Some banks have responded with targets for underrepresented communities. It is an interesting and exciting space for banks.