Introduction:
In the rush to embed S metrics into more Sustainability Linked loans and bonds, we have seen a large uptick in the frequency of the use of OH+S KPIs such as long-term injury rates, fatalities etc.
Whilst there is no doubt this is a key ESG issue for many businesses, for the reasons below we don’t think the KPIs based on this area are solid and credible.
OH&S KPIs:
KPIs/ambition for lower injuries and accidents which is something so fundamental and basic, do not lend itself to being ambitious.
It is also a bit strange that KPIs on this area would be seen as an incentive for a bank or investor perspective to a harm people or see injuries, so coupon/pricing increases are made – strange indeed!
Considerations:
Our view on this is based upon the following (the thinking of which) could be used in relation to many KPIs and are fundamental points and concepts in our view for linked facilities.
- OH+S metrics are very much BAU;
- Usually these are more based around maintaining a level which is not ambitious;
- OH+S metrics are really just basic/fundamental risk management; and
- These metrics are also generally focused on basic compliance and items which a business should have mastered already.
Conclusion and Future:
There is now doubt that OH+S metrics and long-term injury rates etc. are a material ESG issue for many businesses.
However, this doesn’t mean that every material issue lends itself to being used as a good and credible KPI for the purposes of a sustainability linked transaction.
The bottom line is how do you show ambition and a step change for something that is so fundamental and crucial for a business ?
For this issue we don’t think it can.
