CaixaBank
2 Contributions by CaixaBank Experts
PRACTICE NOTES
Key takeaways
Purpose of the SLL Provisions: The LMA’s Sustainability-Linked Loan Provisions set out suggested wording to embed sustainability-linked terms within loan documentation.
Function and Scope: In SLLs, the interest margin flexes according to the borrower’s progress against pre-agreed SPTs, measured by defined KPIs.
Sustainability Margin Adjustment: A ratchet applies so the margin moves up or down based on the count of SPTs achieved in each SLL Reference Period, with scope to customise triggers and the economic effect.
Compliance and Reporting: After every SLL Reference Period, the borrower must provide a Sustainability Compliance Certificate, backed by a Sustainability Report and an independent Verification Report evidencing outcomes and approach.
Consequences of Breach: Breaching sustainability-linked undertakings or representations typically does not constitute an event of default; instead, SPTs are treated as unachieved, which feeds into margin calculations and may precipitate
Banking & Finance
PRACTICE NOTES
Introduction
Purpose of this Practice Note
This Practice Note maps the principal environmental, social and governance (ESG) considerations influencing project finance transactions. It explores how lenders and sponsors weave ESG standards into due diligence, contractual suites, and oversight after financial close. It also reviews the tightening interplay between soft-law norms and binding regulation, as project finance—once anchored chiefly in financial covenants and risk allocation—now finds its identity equally in its ESG profile. This shift unfolds amid intensifying regulatory focus, investor behaviour and public scrutiny. The aim is to equip practitioners with a clear analytical framework for navigating this evolving discipline.
Relevance of ESG in Project Finance
ESG considerations have grown in prominence in project finance because they shape investment choices, risk management and long-term business sustainability. Investors and financiers apply ESG criteria to assess corporate conduct, anticipate future financial performance, and manage risks, notably around climate change,
Banking & Finance
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