Sustainability performance target

Definition

A sustainability performance target is the measurable commitment that determines whether a sustainability-linked bond or loan's financial terms change: it expresses a level of improvement in a chosen key performance indicator — for example cutting Scope 1 and 2 emissions intensity by a stated percentage against a baseline year — to be reached by a target observation date. Under the ICMA Sustainability-Linked Bond Principles and the LMA Sustainability-Linked Loan Principles, targets must be material to the issuer's business, ambitious relative to both the baseline and the issuer's own trajectory, set before issuance, and verified externally both at framework stage and on achievement. Missed targets typically trigger a coupon step-up, which is why calibration — neither trivially easy nor unreachable — is the market's central integrity debate.