Borrowers and lenders entering into loan transactions that are marketed or intended to qualify as ESG loan transactions from March 9 onwards will likely be expected to align with recent updates to the Green Loan Principles, Social Loan Principles and Sustainability-Linked Loan Principles (collectively, the “2023 Principles”) developed by the Loan Market Association (“LMA”), Loan Syndications & Trading Association (“LSTA”) and Asia Pacific Loan Market Association (“APLMA”) (collectively, the “Loan Associations”).1
The Loan Associations’ principles are voluntary but generally accepted guidelines for borrowers and lenders participating in ESG loan transactions globally.2 ESG loan transactions include (1) loans the net proceeds of which (or an amount equivalent to such net proceeds) are used to finance or refinance “Green Projects” or “Social Projects”, which are projects, assets, investments or related expenditures with environmental or social objectives, respectively, and (2) sustainability-linked loans, which are loans whose economic terms, typically the margin, are linked to whether the borrower meets certain predetermined sustainability-related key performance indicators (“KPIs”). Read more
