As a proportion of KPIs used, social indicators peaked in 2020, before trending downwards in subsequent years. This report provides an overview of the current state of play in the social KPI market, breaking down which types of targets are used and why issuers gravitate towards certain social indicators.
We also unpack how the combination of climate and social KPIs can result in instruments with decorrelated targets that can, in principle, increase the option value for investors under certain step-up structures. Through detailed case studies on Tamarack Valley Energy, the Republic of Chile, and Olam Group, the paper deep dives into examples where social KPIs are woven into SLB structures.
To conclude, we place social KPIs in the context of the just transition. While pairing climate and social goals can make an SLB appear aligned with just transition principles, we note that this alignment only holds when the social target directly addresses the social impacts of the low-carbon transition itself.
