A review of social KPI usage in SLBs

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.

About the authors

Prahalad Prasad

Associate Director, Research

Based in London, Praha covers topics including but not limited to the just transition, sustainability-linked bonds and deforestation. He previously spent seven years in Lloyds Bank’s Debt Capital Markets team.

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.