How is it different from a green loan?
A green loan focuses on financing eligible environmental projects. Sustainability-linked financing focuses on improvements measured against agreed targets; it can support general business purposes, subject to the facility's permitted uses.
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| Your starting point | Route to explore | What sits at the centre of it |
|---|---|---|
| “We want to finance an eligible solar installation.” | Green loan or green Islamic financing | The project, how the money is used and its environmental benefit |
| “We need business financing and can commit to measurable sustainability improvements.” | Sustainability-linked financing | Performance targets and their connection to the financing terms |
The industry Green Loan Principles guidance explains this distinction. A facility can combine both approaches if it meets the relevant components of each.
If your main need is a particular environmental investment, start with our green-loans guide. If you're still weighing several options, use how to choose a financing route.
Get comfortable with three terms
These terms describe different parts of the same plan:
- Key performance indicator (KPI): what you measure, such as water used per unit of production.
- Baseline: the starting measurement you compare future results with.
- Sustainability performance target (SPT): the result you agree to reach by a specified date.
Here's a made-up example to make the difference clearer. A manufacturer records water use of 10 litres per unit during an agreed baseline year. It proposes reducing that to 8 litres per unit by an agreed future date—a 20% reduction.
The KPI is water use per unit produced. The starting level is 10 litres per unit, with a target of 8 litres per unit by the agreed deadline.
Those numbers are only an illustration. They do not tell you what target a bank would accept. Before taking a proposal forward, you would need to explain the records, which operations are included and why the improvement matters for your business.
What should a credible arrangement include?
The March 2025 Sustainability-Linked Loan Principles, developed by three loan-market associations, set out five components:
- Relevant measures: KPIs should address significant sustainability issues in the business.
- Ambitious targets: improvements should go beyond business as usual and regulatory requirements.
- A link to loan terms: the agreement explains how performance affects financial or structural terms.
- Reporting: lenders receive performance information at least annually and for assessment periods that could change the terms.
- Verification: independent external verification of performance is required for those assessment dates or periods.
These are voluntary industry principles. Their requirements describe alignment with that framework; your financing agreement sets out your contractual obligations.
The Loan Market Association's practical overview also explains that annual targets can have justified exceptions. Reporting, target dates and verification dates therefore deserve separate attention when you review an offer.
Choose an improvement your team can explain and deliver
Start with a conversation between finance and the people running the relevant operations. What needs to improve? What records do you already have? What action would change the result?
For the manufacturer in our example, useful questions might be:
- Where does most of the water go, and can we measure it reliably?
- Would fixing leaks, changing equipment or reusing water make the proposed improvement possible?
- What would those actions cost, and who would manage them?
- How would we compare results if production volumes or the product mix changed?
Keep the measurement method clear. Water per unit and total water use answer different questions. A reduction in one does not automatically mean a reduction in the other.
Bring uncertainties into the discussion early. An equipment upgrade may depend on a supplier's delivery date or a production shutdown. Your target proposal should explain those dependencies rather than leave the bank to discover them later.
The subject can extend beyond energy and emissions. The Loan Market Association's overview discusses environmental and social objectives, including emerging nature-related measures. The appropriate choice depends on the business and the proposed facility; appearing in the guidance does not make a topic eligible for a particular product.
A Malaysian example: CIMB's programme
CIMB Bank and CIMB Islamic Bank have expanded their sustainability-linked financing programme with new options for oil palm and real estate businesses, including SMEs. The changes also support companies buying green-certified properties or upgrading existing buildings to qualify for recognised certification.
Announced on 19 October 2026, the changes extend CIMB’s RM3 billion programme, launched in 2023. Customers that meet sustainability targets agreed with the bank may receive financing rebates of up to 0.50% a year. The actual rebate depends on the targets, the results achieved and the financing agreement. See CIMB’s October announcement and its original programme launch.
Options for oil palm businesses
The programme includes both plantation companies and palm oil mills. CIMB lists methane capture, biomass use, waste reduction and reuse, water management, lower-carbon farming practices and green vehicles among the initiatives businesses can consider.
The right starting point depends on the operation. A mill considering methane capture will need a different investment plan from a plantation improving water use or replacing vehicles. Businesses should identify what they want to improve, estimate the cost and gather records showing current performance. These might include electricity bills, fuel purchases, water use and production figures.
Those records can help the business and CIMB agree on suitable targets and how to measure progress.
Options for building owners and buyers
For property businesses, CIMB lists solar panels, battery storage, energy-efficiency upgrades, energy audits and recognised green-building certifications. The programme also includes systems that help owners monitor and manage energy use.
CIMB has introduced Building Energy Intensity, or BEI, as an alternative performance measure for real estate. BEI measures how much energy a building uses relative to its floor area. It helps owners track energy efficiency, but a lower BEI does not automatically mean a building qualifies for green certification.
Owners should ask how CIMB will establish the baseline and measure improvements. Occupancy, opening hours and renovations can change energy use, so comparisons need to account for relevant changes. The calculation method should also explain which building areas and energy sources are included.
Help for SMEs measuring emissions for the first time
Eligible SMEs that have never measured their emissions can explore an option that rewards first-time measurement and reporting. CIMB says it provides subsidised tools, practical assistance and emissions verification. The first report establishes a baseline for measuring reductions in subsequent years.
CIMB’s GreenBizReady programme also connects businesses with training, advisers and service providers. SMEs should check what support they qualify for, what the subsidy covers and which costs they must pay themselves. See CIMB GreenBizReady.
How the rebate works
CIMB’s September 2026 programme terms allow Commercial Banking customers to apply for the programme with conventional or Islamic financing. The bank assesses rebate eligibility for each calendar year and pays the rebate the following year if the customer qualifies. Customers must update the required information in a carbon-management platform, and an independent reviewer checks it.
The terms mention rebates for up to seven years, but also set a final cutoff of 31 May 2030. Businesses joining now should ask how many years of rebates they could receive. The rebate may end before the financing is fully repaid.
CIMB calls the new arrangement a “dual-SPT” structure. SPT stands for Sustainability Performance Target, but the announcement does not explain which two targets apply or how each affects the rebate.
Before accepting an offer, ask CIMB:
- What targets apply, and how will results be measured?
- What happens to the rebate if only one target is met?
- Which certifications and records are accepted?
- Who pays for verification, and when are reports due?
Compare the potential rebate with the cost of making the improvements and showing the results. Ask for a worked example so you can judge the overall cost of the financing. For enquiries, CIMB’s SLF product page directs readers to their relationship manager or its sustainable-finance team.
Compare the whole cost, including the work behind the target
A potential rebate is one part of the decision. You still need to fund the improvements and maintain the evidence.
Ask for enough information to compare:
- The financing payments, fees and any security required.
- The proposed benefit, when it is assessed and when you receive it.
- Equipment, operational and staff costs needed to deliver the improvement.
- Data tools, reporting support and verification costs, including who pays them.
- The result if you miss a target, submit information late or cannot verify the figures.
Request a comparison showing what happens when the target is met and when it is missed. Confirm whether missing the target removes a rebate, increases a charge or has another contractual consequence. Avoid budgeting as though the best outcome has already happened.
The Loan Market Association's overview identifies verification costs as a practical challenge for some borrowers. It also notes that information already verified for other reporting may not need duplicate verification under the principles. Ask whether existing evidence covers the required measure, period and scope.