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May 04, 2023
The LMA has today published model provisions for sustainability-linked loans (SLLs). These model provisions look to provide a proposed form of draft SLL provisions for inserting into LMA loan documentation, which are aligned with the LMA's Sustainability-Linked Loan Principles and accompanying Guidance notes*.
Put together by an experienced working party of financial institutions and law firms active in sustainable finance, these model provisions seek to reflect current market practice, and provide a vital tool to protect the integrity of the SLL market by providing a basic drafting framework to assist parties in the negotiation of the document. The model provisions also include extensive drafting notes setting out points for parties to consider when undertaking a SLL transaction.
It is nonetheless important to remember that SLLs have seen meteoric growth since their inception in 2017 and, as such, market practice is in a constant state of evolution. Much like the SLL product itself, it is intended that these model provisions shall evolve in line with the market.
Commenting on the document, Gemma Lawrence-Pardew, Head of Sustainability and Director at the Loan Market Association said: I personally am very excited by the launch of this project. Finance is an essential tool to facilitate the transition to a more environmental and socially responsible world. The inherent flexibility of the sustainability-linked loan (SLL), being sector and jurisdiction agnostic, means it is the perfect tool to help drive this transition forward. We therefore hope that the launch of these model terms will provide a useful tool to borrowers and lenders alike to increase the uptake of the SLL product and aid discussions, new and old, going forward.
Sukhvir Basran, Partner at Cadwalader, Wickersham & Taft and LMA's drafting law firm on this project, said: We are delighted to have worked with the Loan Market Association on the creation of the model provisions for sustainability-linked loans (SLLs). SLLs are, without doubt, one of the most important tools for achieving a just transition to a sustainable future and the launch of these model terms will continue to drive the growth of sustainable finance. We hope the model terms will help lenders, corporates and advisers to structure SLLs efficiently, scale sustainable finance solutions and open the SLL product to newcomers to the market.
*Principles and Guidance produced in conjunction with the APLMA and LSTA.