Jurisdiction(s):
United Kingdom

Drafting and negotiating LMA sustainability-linked loan provisions: margin ratchets, reporting and verification, declassification and publicity restrictions, amendment events, and sustainability co-ordinator protections

Published by a LexisNexis Banking & Finance expert

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 declassification.
Declassification Mechanism: A declassification regime can switch off the ‘sustainability-linked’ label following specified events (such as repeated breaches or significant corporate changes), at which point the margin ratchets no longer apply.

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Paul Donnelly

Senior Legal Counsel, CaixaBank

Paul has held an in-house role of senior legal counsel at CaixaBank S.A., UK Branch since the beginning of 2016. Paul has worked on a wide range of banking matters, including acquisition and leveraged finance, investment grade corporate lending, property finance, restructurings and structured financings from previously working as an associate at the London office of Skadden Arps and Nabarro LLP....

Oriol Espar

Oriol holds an in-house role of senior legal counsel at the Corporate & Institutional Banking financings team at CaixaBank S.A. since the end of 2015, having worked on a wide range of banking matters, mainly corporate lending, project, asset, and other structured financings, and occasionally leveraged financings and restructurings. Prior to this role he worked as a legal counsel in the Litigation & Dispute Resolution team at CaixaBank from 2012 and previously worked for 8 years as a senior associate at a Spanish firm....

Web page updated on 21/05/2026

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