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Updates to the Green Loan Principles, the Sustainability-Linked Loan Principles, and the Social Loan Principles and their Associated Guidance Documents Have Been Published
Practical Law Canada Legal Update w-038-6912 (Approx. 4 pages)
Updates to the Green Loan Principles, the Sustainability-Linked Loan Principles, and the Social Loan Principles and their Associated Guidance Documents Have Been Published
by Practical Law Canada Finance
| Published on 02 Mar 2023 • Canada (Common Law) |
The Loan Market Association (LMA), the Asia Pacific Loan Market Association (APLMA), and the Loan Syndications and Trading Association (LSTA) jointly published updated versions of the green, social, and sustainability-linked loan principles, together with the associated guidance documents for each set of principles on February 23, 2023.
On February 23, 2023, the Loan Syndications and Trading Association (LSTA), the Loan Market Association (LMA), and the Asia Pacific Loan Market Association (APLMA) together published updated versions of the following six Environmental, Social, and Governance (ESG) documents:
The LSTA indicates that the changes made to each of these documents "are modest (in substance) but do refresh the Principles and Guidance to accurately reflect current market practice and align them, as appropriate, with other frameworks, such as the parallel Principles maintained by ICMA" (Recent Sustainable Lending Updates – Part 1, LSTA, March 1, 2023).
On March 1, 2023, the LSTA published a summary of the changes made to the SLLP and has indicated that it will publish summaries of changes made to the balance of these documents in the near future. Specific changes to the SLLP that were highlighted by the LSTA in Recent Sustainable Lending Updates – Part 1 include:
- An updated definition of "sustainability-linked loan" that better aligns with the corresponding definition in the International Capital Market Association's (ICMA) Sustainability-Linked Bond Principles.
- The appendix to the SLLP that set out common categories of key performance indicators (KPI) was deleted. Instead parties are encouraged to refer to the much more comprehensive Illustrative KPI Registry published by ICMA.
- Increased emphasis has been placed on the need for the KPI that are used in a sustainability-linked loan to:
- be material to a borrower's core sustainability and business strategy; and
- address relevant ESG challenges within the borrower's industry.
Application
The principles will apply to transactions completed on and after March 9, 2023. Transactions completed prior to that date should be reviewed with a view to the prior version of the applicable principles that was in force at the time the transaction was entered into.