New Guidance Documents on Green Loan Principles and Sustainability Linked Loan Principles for a Post-COVID-19 World

Many hope to see an expansion in areas that stimulate growth in a more environmentally friendly manner

By Drew D. Salvest & Natalie A. Stewart

19.05.2020

While the world is currently focused on the impact of COVID-19 on the global economy, with “COVID-19 Bond” issuance easily outdistancing the current volume of green financing, it is time to consider post-COVID-19 activities. One positive effect of the pandemic is the demonstrable improvement of carbon levels and other environmental measures. So, as national governments consider measures to reopen their economies, lenders and borrowers may want to consider how best to finance the economies’ reemergence. Many hope to see an expansion in areas that stimulate growth in a more environmentally friendly manner.

In this context, loan market groups including the Asia Pacific Loan Market Association (APLMA), Loan Market Association (LMA) and Loan Syndications and Trading Association (LSTA) have recently published guidance to market participants on how to apply the Green Loan Principles (GLP) and Sustainability Linked Loan Principles (SLLP) in practice. The aim of the guidance is to develop the market for green financing, following the publishing of the GLP in March 2018 and the SLLP in March 2019.

The key difference between green loans and sustainability linked loans is that green loans place greater significance on the use of proceeds for green projects, whereas sustainability linked loans look to the sustainable nature of the borrower measured against specific targets. Loans can follow both the GLP and SLLP, but are rarely seen in the current market.

Further guidance has been given on the following aspects: Continue reading “New Guidance Documents on Green Loan Principles and Sustainability Linked Loan Principles for a Post-COVID-19 World”