Green bonds tell investors where money will be spent. Sustainability-linked loans and bonds work differently: the borrower can use the money for general purposes, but the interest rate moves up or down depending on whether it meets pre-agreed sustainability targets. The structure is gaining ground in Africa, among governments and companies alike.
Recent African examples
- Côte d’Ivoire secured a sustainability-linked loan of about $504.6 million from Standard Chartered in September 2025, with a World Bank guarantee. S&P Global notes that such instruments let governments formalise sustainability commitments to external stakeholders.
- Safaricom has a KSh30 billion sustainability-linked loan that the company says supports its net-zero goal for 2050 alongside gender diversity and equality objectives.
- Senelec, Senegal’s power utility, became the first public company in Africa to issue a sustainability-linked bond in 2025.
S&P adds that sustainability-linked structures are especially useful for companies in hard-to-abate sectors such as heavy industry, mining and logistics, which may not have enough eligible green projects for a use-of-proceeds bond.
Where the value comes from
A sustainability-linked deal is only as good as its targets. Investors and lenders now look for:
- Material indicators that cover the borrower’s biggest impacts, such as emissions for a utility or electricity access for a power company, rather than peripheral ones.
- Ambitious targets that go beyond business as usual and are consistent with public commitments.
- A verified baseline and annual external verification of performance.
- Meaningful pricing, with step-ups large enough to change behaviour if targets are missed.
- Public reporting on progress, so the market can see whether targets were met.
The risk
If targets are easy, borrowers pay structuring and verification costs for a label that changes little, and the market loses trust. If targets are credible, the structure rewards real progress and gives investors a clear way to hold borrowers to account. As more African issuers use sustainability-linked debt, publishing targets and results will be what separates leadership from marketing.
Sources: S&P Global: Sustainable finance in Africa · The Standard: Safaricom launches 2025 sustainability report · Financial Afrik: Senelec sustainability-linked bond
