Want the best corporate loan rates? You’d better have the environmental, social, and governance (ESG) principles in place, according to a Wall Street Journal article.

More companies could be adding environmental and sustainability targets as part of their underwriting requirements to get the best possible interest rates on corporate loans. These sustainability-linked loans could become even more popular given the lack of global standards, the article noted.

One notable feature of these loans is their ability to adjust rates based on meeting ESG standards. This could incentivize companies to push their ESG adoption higher in order to get more favorable interest rates on corporate loans.

“Sustainability-linked loans carry interest rates that adjust based on whether a company meets a predetermined environmental, social or governance goal, such as reducing carbon emissions,” the WSJ article said. “U.S. companies took out $83.8 billion in such loans through Sep. 16, up from $2.5 billion during the same period in 2020, according to Dealogic, a data provider. U.S. corporate loan volume, including sustainability-linked loans, was $1.7 trillion as of Sep. 16, Dealogic said.”

An ESG-Conscious ETF to Consider

ETF investors looking to play the ESG component of a global move towards more adoption can opt for the Global X Conscious Companies ETF (KRMA). The fund is up 16% so far this year, playing off the continued popularity of ESG.

The fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Concinnity Conscious Companies Index. The underlying index is designed to provide exposure to companies listed in the U.S. that operate their businesses in a sustainable and responsible manner, as measured by their ability to achieve positive outcomes that are consistent with a multi-stakeholder operating system (“MsOS”), as defined by the provider of the underlying index.

KRMA offers:

  • Well-managed companies: As the first ETF to utilize the Multi-stakeholder Operating System (MsOS), KRMA offers exposure to companies achieving positive outcomes for five key stakeholders: customers, suppliers, stock & debt holders, local communities, and, notably, employees.
  • Rigorous Research: Through the Concinnity Conscious Companies Index, KRMA employs proactive (positive) screens in a proprietary, three-step process that monitors for consistent achievement, establishing a very high bar for inclusion.
  • Depth and breadth: KRMA applies a wide range of sources that focus on measuring positive outcomes, including fundamental financial ratios to assess for operational efficiency and other long-term value creation indicators.

KRMA Chart

For more news, information, and strategy, visit the Thematic Investing Channel.