Nordic Credit Rating notes increasing investor interest in sustainability-linked bond (SLB) securities with hybrid structures.
SLB hybrids can increase an issuer's appeal to impact investors and incentivise issuers to improve their performance in terms of energy usage, waste management or other sustainability-related issues. While coupon step-up features in regular hybrids are a key factor in our assessment of equity treatment, in the case of SLB hybrids they can be viewed differently if they are not deemed to be incentives to call the instrument.
In this commentary we detail the various features of SLB hybrids and explain how they affect our view on equity treatment in our corporate credit analysis, as well as their impact on issuer and issue ratings.
Mille Fjeldstad, analyst, +4799038916, firstname.lastname@example.org
Sean Cotten, chief rating officer, +46735600337, email@example.com