It stands for 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.
