Loan Market Association publishes new model provisions for Green Loans
Monday, 20 November 2023
On 7 November 2024, the Loan Market Association (LMA) published Draft Provisions for Green Loans (the Green Loan Provisions).
The Green Loan Provisions provide a proposed standard form of green loan clauses which may be inserted into LMA-style facility agreements, thereby improving clarity and consistency across the green loans market and the integrity of green loan facilities. The Green Loan Provisions are in line, and should be read together, with the LMA’s previously published Green Loan Principles and accompanying Guidance to the Green Loan Principles.
While not intended to contain an all-embracing analysis of the types of clauses used in green loan transactions, the Green Loan Provisions do act as a useful starting point that can be tailored to case and sector specifics and include a number of footnotes to assist in drafting and negotiation of green loan facility agreements.
As befitting a use of proceeds loan product, the proposed management of proceeds clause expressly sets out that borrowers will be required to provide evidence to enable the tracking, monitoring and evaluation of the manner in which green loan proceeds have been applied.
The Green Loan Provisions also contain a form of green loan report detailing compliance or non-compliance, as the case may be, with the core components of the Green Loan Principles and which is more comprehensive than the green loan compliance certificates sought by certain lenders to date.
In an effort to avoid potential accusations of greenwashing, the Green Loan Provisions include a requirement for borrowers to consult in good faith with lenders prior to any member of the group making any disclosure that references any loan or utilisation as “green”.
The green loans market continues to grow, and so it is hoped that the publication of the Green Loan Provisions will be a useful tool providing a degree of certainty and efficiency for all parties involved in drafting and negotiating green loan documentation.
For further information on green loans or any other aspects of sustainable finance, please contact Karen Outram or any other member of the ByrneWallace LLP Banking and Finance team.
