“Follow the money.”
Ironically, the line never appeared in the original reporting or the book. It was added by the film’s screenwriter, and yet, it became the most enduring truth.
The phrase was immortalized in the 1976 film, *All the President’s Men, which dramatized the Watergate investigation led by Bob Woodward and Carl Bernstein of The Washington Post. Since then, it’s become a shorthand for thinking in First Principles.
In the world of climate, this dictum still holds. Every pledge is just a headline until the capital moves. The real story? It’s in the balance sheet.
We need about $1.5 trillion to $2 trillion each year to limit global warming to 1.5°C. Framing the climate change crisis under the umbrella of ‘Climate Finance’ gives impetus and a sense of urgency to find solutions. Climate Finance is the most potent weapon to redesign growth and fund projects that really matter.
The basic idea of Climate Finance is simple: if you hit your emissions targets, you get cheaper capital. If you miss them, your loan becomes more expensive. This isn’t a sidecar to a company’s climate journey, it’s the vehicle under which we incentivise green initiatives.
That’s how Green Loans matter.
What Are Green Loans? Why Do They Matter?
Green loans and Sustainability-Linked Loans (SLLs) are forms of performance-based financing. They differ from traditional green bonds, which are tied to specific projects like wind farms or solar plants. SLLs link the pricing of a loan (often billions of dollars) to whether a company hits specific, pre-negotiated environmental or social targets.
These could include:
- Reducing Scope 1, 2, and 3 emissions…
- Increasing the share of renewable energy used…
- Cutting waste, water use, or supply chain impacts…
The better a company performs, the cheaper the loan becomes. If it misses, the margin increases. The structure is simple, but its implications are profound. Capital markets are no longer just spectators to the climate crisis. They’re forced to be participants.
But, how does this work?
Innovative Green Loans: Nokia’s €1.5 Billion Signal
Earlier this month, Nokia announced a €1.5 billion sustainability-linked loan, coordinated by Citi, ING, JPMorgan and others. The deal is directly tied to Nokia’s climate goals, including Scope 3 emissions, which account for over 95% of its footprint. If the company delivers, its cost of capital drops.
But this is not Nokia’s first step. The company has also linked executive pay to its carbon targets, aligning incentives at the top.
And they’re far from alone:
- Mahindra & Mahindra secured India’s first SLL in 2021, linked to emissions reduction across its auto and farm divisions.
- Ørsted, the Danish renewable major, tied credit facilities to its carbon intensity per MWh.
- Enel, an Italian energy giant, pioneered this space with a $1.5 billion SLL in 2019 tied to renewables deployment.
- Maersk, the shipping behemoth, secured a $5 billion SLL to decarbonise its fleet: one of the hardest sectors to abate.
These are just a few examples. Across sectors, from tech to transport to utilities, companies are choosing to embed climate targets into their core financial architecture.
The volume of sustainability-linked loans crossed $1 trillion globally last year, with a significant portion going to emerging markets.
Even more important: these structures are gaining traction in India, Brazil, Indonesia, South Africa — places where climate finance must not only decarbonise, but also unlock industrial upgrading.
Who’s Powering the Shift though?
The real force behind this shift are banks. Financial institutions are building new incentive mechanisms into the core of their lending.
- ING, HSBC, Citi, BNP Paribas, and Barclays are now active players in structuring climate-linked loans.
- BlackRock, Macquarie, and sovereign wealth funds are embedding ESG covenants into private equity and debt deals.
- In India, RBI and SEBI are now laying regulatory foundations for climate disclosures and taxonomy.
- Development banks like IFC and AIIB are scaling green bond guarantees in emerging markets to crowd in private capital.
This isn’t virtue signalling anymore. We’re talking risk management, reputation management, and, increasingly, competitive advantage by believing and transitioning to green.
People peg progress and climate at opposite ends of the spectrum. It’s not. Read how the world’s most pragmatic investor was forced to adopt green because of how lucrative it is - here
For decades, climate was seen as a cost. Something to be minimized or postponed. Now, it’s becoming a source of alpha — a way to unlock better returns, and assure long-term resilience.
Abundance: A Future Built by Smarter Capital
This shift isn’t about austerity. It’s about abundance. The cheapest electricity should also be the cleanest. The easiest loans should go to the most regenerative industries. And industrial growth in the Global South should be supercharged by smart capital.
When companies realize that hitting net-zero targets means cheaper capital, faster approvals, and lower insurance premiums, climate becomes a strategic asset, not a compliance headache. And when lenders realize that climate laggards pose higher credit risks, they reprice those risks.
This is a financial design challenge that’s being solved by Green Capital. It’s a new grammar for growth. After all, the smartest money in the world is betting on a liveable planet.
P.S. I’d love to hear about innovative Green Capital deployments across the world. Hit me up: adi@alt-carbon.com