Sustainability-linked finance: a lever for firm-level resilience innovation

Sustainability-linked finance (SLF) offers a promising pathway to close the gap in corporate financing for climate change adaptation by linking borrowing costs to climate-resilience performance. However, current instruments fall short of their potential. Furthermore, private actors face a conundrum: how to price, prioritise and operationalise adaptation when climate risk is uncertain, future-oriented and poorly rewarded by markets.

This paper addresses that challenge by exploring how SLF can serve as an effective mechanism to realign financial incentives and unlock firm-level innovation in climate resilience.

Key points for decision-makers

• The authors analyse 701 SLF instruments issued by 395 firms across real estate, electric utilities and agrifood and compare embedded key performance indicators (KPIs) with those disclosed in sustainability reports.
• Across adaptation, resilience and combined ‘mitigation–adaptation–resilience’ (MAR) themes, firms report 2,619 relevant KPIs, yet only 511 (19.5%) are embedded in financial contracts, leaving 80.5% unenforced.
• This fourfold gap highlights a significant opportunity to expand SLF coverage using metrics that firms already track.
• The bottleneck is not data availability but a lack of standardised, verifiable adaptation and resilience benchmarks.
• The authors propose a suite of process-based KPIs and contractual mechanisms to bridge the gap, to enable SLF to evolve into a credible, scalable tool for embedding climate resilience into corporate strategy and unlock private capital for adaptation.
• The study provides the first comprehensive mapping of how adaptation and resilience metrics are embedded or omitted in SLF instruments.