Market Trends 2023: Sustainability-Linked Loans

Summary

This practice note discusses market trends for sustainability-linked loans (SLLs) and provides examples of loan clauses in certain publicly filed credit agreements in 2023. These provisions provide an incentive to borrowers (generally in the form of lower interest rates) for hitting predefined green targets, such as decreasing greenhouse gas emissions, as part of an overall environmental, social, and corporate governance program. The borrower's sustainability performance is measured using predefined sustainability performance targets (SPTs), as measured by predefined key performance indicators (KPIs), which may comprise or include external ratings and/or equivalent metrics, and which measure improvements in the borrower's sustainability profile.