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Finance


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Sustainability-Linked Repo


A repo transaction/ trade (repurchase agreement/ RP) whose financial and/ or structural characteristics are linked to the borrower’s (collateral seller’s) performance as to a set of predefined indicators or targets related to sustainability (sustainability KPIs, sustainability performance targets or SPTs). If the preset KPIs/ SPTs are met by the seller, cost of borrowing (cheaper cash) can be attained by means of a differentiated repo rate.

This type of repo is meant to provide firms with financial incentives to perform well on sustainable business. Sustainability can be observed and accounted for, using a set of strategies including sustainable collateral, sustainable deployment of proceeds, and broadly a sustainability-linked business approach.

This repo is known for short as SL repo.


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