On 4 May 2023, the Loan Market Association (LMA) published model provisions for sustainability-linked loans (SLL Provisions) in response to the growth of sustainability-linked loans in recent years.
What are sustainability-linked loans?
The LMA's glossary defines a sustainability-linked loan (SLL) as any type of loan instrument and/or contingent facility that incentivises the borrower's achievement of ambitious, predetermined sustainability performance objectives. A borrower's sustainability performance is measured using sustainability performance targets, which include key performance indicators, external ratings and/or equivalent metrics that measure improvements in the borrower's sustainability profile.
The purpose of the SLL Provisions
Those documenting SLLs can use the SLL Provisions and, subject to the parties' requirements and other case-specific facts, the provisions can be incorporated into the LMA's leveraged facilities agreement. The SLL Provisions can also be adapted for use in conjunction with the LMA's other recommended forms of facility agreements. Users should review the SLL Provisions and the extensive drafting notes, which set out points for parties to consider on such transactions, as well as the LMA's Guidance on Sustainability-Linked Loan Principles.
It is important to note that the SLL Provisions are only intended to act as a starting point for drafting, based on current market practice.
The SLL Provisions are available on the LMA website.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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