Sustainability linked loan
Sustainability-Linked Loan Principles (SLLP).
(SLL).
The SLLP define a sustainability linked loan as:
- Any type of loan instrument and/or contingent facility
- Which incentivises the borrower’s achievement of ambitious, predetermined sustainability performance objectives.
The borrower’s sustainability performance is measured using sustainability performance targets (SPTs).
Incentives are normally a reduction in interest payable by the borrower, generally described as a reduction in interest margin.
Contingent facilities include bonding lines, guarantee lines and letters of credit.
The use of proceeds in relation to a sustainability linked loan is not a determinant in its categorisation.
In most cases, sustainability linked loans will be used for general corporate purposes.
Instead of determining specific uses of proceeds, sustainability linked loans look to improve the borrower’s sustainability profile by aligning the loan terms to the borrower’s performance against the SPTs.
See also
- Bonding
- Bonding line
- Declassification
- Guarantee line
- Green bond
- Letter of credit
- Margin
- Sleeping sustainability-linked loan
- Social impact bond
- Sustainability
- Sustainability bond
- Sustainability Bond Guidelines
- Sustainability-Linked Loan Principles (SLLP)
- Sustainability performance target
- Sustainable finance
- Use of proceeds bond
