Green Loan Principles

Green Loan Principles February 2023

Introduction It is important that green loans should not be considered

interchangeable with loans that are not aligned with the four
The green loan market aims to facilitate and support the key core components of the GLP.
role that credit markets can play in financing progress towards
All transactions completed prior to 9 March 2023 will be exempt
environmental sustainability.
from following these GLP, and instead should be reviewed in
The Green Loan Principles (GLP) aim to promote the development conjunction with the version of the GLP in force at the time of
of the green loan product by providing a recommended framework origination, extension or refinancing of the loan, as applicable.
of market standards and guidelines for use across the green loan Care should be taken not to misrepresent such loans as having been
market, whilst allowing the loan product to retain its flexibility. originated, extended or refinanced in accordance with this current
version of the GLP. All loans originated, extended or refinanced after
The GLP are voluntary recommended guidelines, developed by 9 March 2023 must fully align with this version of the GLP to be
an experienced working party consisting of representatives from classified as green loans.
leading financial institutions and law firms active in global loan
markets. They are to be applied by market participants on a
deal-by-deal basis depending on the underlying characteristics
Green Loan Principles –
of the transaction, which recommend transparency and disclosure, Core Components
and seek to support integrity in the development of the green loan
The GLP set out a framework, enabling all market participants to
market by clarifying the instances in which a loan may be
clearly understand the characteristics of a green loan, based around
categorised as “green”.
the following four core components:
The GLP seek to support borrowers in financing environmentally
sound and sustainable projects that foster a net-zero emissions 1. Use of Proceeds
economy, protect and restore the environment, facilitate adaptation
to climate change, and/or provide other environmental benefits. GLP 2. Process for Project Evaluation and Selection
aligned loans should provide transparent green credentials
alongside an investment opportunity. By having borrowers report on
3. Management of Proceeds
the use of green loan proceeds, the GLP promote a step change in
transparency that facilitates the tracking of funds to environmental
projects, while simultaneously aiming to improve insight into a 4. Reporting
project’s estimated impact. The GLP also seek to emphasise the required transparency,
The GLP provide high level, non-exhaustive categories for eligible accuracy and integrity of the information that will be disclosed
Green Projects (see Section 1 - Use of Proceeds) in recognition of the and reported by borrowers to stakeholders through these core
diversity of current views and of the ongoing development in the components.
understanding of environmental issues and consequences. At the
same time, the GLP allow for the use of complementary definitions,
standards and taxonomies for determining the environmental
sustainability of projects. The GLP encourage all participants in the
market to use this foundation to develop their own robust practices,
referencing a broad set of complementary criteria as relevant.
1 Use of Proceeds

The GLP will be reviewed on a regular basis to accommodate the The fundamental determinant of a green loan is the utilisation
development and growth of the green loan market. of the loan proceeds for Green Projects (including other related
and supporting expenditures, including R&D), which should be
Green Loan Definition appropriately described in the finance documents, and, if
applicable, marketing materials for the financing and/or a green
Green loans are any type of loan instruments and/or contingent loan framework. All designated Green Projects should provide
facilities (such as bonding lines, guarantee lines or letters of credit) clear environmental benefits, which will be assessed and,
made available exclusively to finance, re-finance or guarantee, in where feasible, quantified by the borrower.
whole or in part, new and/or existing eligible Green Projects and
which are aligned to the four core components of the GLP. Where funds are to be used, in whole or part, for refinancing, it is
recommended that borrowers provide an estimate of the share of
It is understood that certain eligible Green Projects may also have financing versus refinancing. Where appropriate, they should also
social co-benefits, and that the classification of a use of proceeds clarify which investments or project portfolios may be refinanced,
loan as a green loan should be determined by the borrower based and, to the extent relevant, the expected look-back period for
on the primary objective of the underlying projects. refinanced eligible Green Projects.
A green loan may take the form of one or more tranches of a loan
facility, and may be made by way of a term loan, revolving credit
facility and/or contingent facilities. Considerations for revolving
credit facilities are set out in Appendix 1.

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Green Loan Principles February 2023

The GLP explicitly recognise broad, non-exhaustive categories 

•  Climate change adaptation (including efforts to make
of eligibility for Green Projects, which contribute to environmental infrastructure more resilient to impacts of climate change,
objectives such as: climate change mitigation, climate change as well as information support systems, such as climate
adaptation, natural resource conservation, biodiversity observation and early warning systems);
conservation, and pollution prevention and control.

•  Circular economy adapted products, production
The following list of project categories, while indicative only and technologies and processes (such as the design and
high-level, captures common types of projects supported, or introduction of reusable, recyclable and refurbished
expected to be supported by the green loan market. Green materials, components and products; circular tools and
Projects include assets, investments and other related and services; and/or certified eco-efficient products); and
supporting expenditures such as R&D that may relate to more
than one category and/or environmental objective. Three

•  Green buildings (that meet regional, national or
internationally recognised standards or certifications for
environmental objectives identified above (pollution prevention
environmental performance).
and control, biodiversity conservation and climate change
adaptation) also serve as project categories in the list. As such, While the GLP’s purpose is not to take a position on which green
they refer to the projects that are more specifically designed to technologies, standards, claims and declarations are optimal for
meet these environmental objectives. environmentally sustainable benefits, it is noteworthy that there
are several current international and national initiatives to produce
The eligible Green Projects categories, listed in no specific order,
taxonomies and nomenclatures, as well as to provide mapping
may include, but are not limited to:
between them to ensure comparability. These may provide useful

•  Renewable energy (including production, transmission, guidance to green loan borrowers as to what may be considered
appliances and products); green and eligible by lenders, but each institution will nonetheless

•  Energy efficiency (such as in new and refurbished buildings,
need to determine whether they wish to align their lending with
these taxonomies, and, if so, whether to do so in whole or in part.
energy storage, district heating, smart grids, appliances and
These taxonomies are currently at various stages of development.
products);

•  Pollution prevention and control (including reduction of air
There are many institutions that provide independent analysis,
advice and guidance on the quality of different green solutions
emissions, greenhouse gas control, soil remediation, waste
and environmental practices. However, it is recognised that
prevention, waste reduction, waste recycling and energy/
definitions of green and green projects may vary depending
emission-efficient waste to energy);
on sector and geography.

•  Environmentally sustainable management of living natural
resources and land use (including environmentally sustainable
agriculture; environmentally sustainable animal husbandry;
climate smart farm inputs such as biological crop protection
or drip-irrigation; environmentally sustainable fishery and
aquaculture; environmentally sustainable forestry, including
afforestation or reforestation, and preservation or restoration of
natural landscapes);

•  Terrestrial and aquatic biodiversity conservation (including the
protection of coastal, marine and watershed environments);

•  Clean transportation (such as electric, hybrid, public, rail,
non-motorised, multi-modal transportation, infrastructure for
clean energy vehicles and reduction of harmful emissions);

•  Green technologies (such as carbon extraction technologies
and energy storage systems);

•  Sustainable water and wastewater management (including
sustainable infrastructure for clean and/or drinking water,
wastewater treatment, sustainable urban drainage systems and
river training and other forms of flooding mitigation);

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Green Loan Principles February 2023

2 Process for Project Evaluation

and Selection 4 Reporting
Borrowers should make, and keep, readily available up to
The borrower of a green loan should clearly communicate to date information on the use of proceeds, such information to be
its lenders: renewed annually until the green loan is fully drawn (or until the

•  the environmental sustainability objective(s) of the
loan maturity in the case of an revolving credit facility), and on a
timely basis in the event of material developments. This annual
Green Projects;
report should include a list of the Green Projects to which the

•  the process by which the borrower determines how the green loan proceeds have been allocated and a brief description
project(s) to be funded fits within the eligible Green Projects of the projects, the amounts allocated and their expected and,
categories; and where possible, achieved impact. Where confidentiality

•  complementary information on the processes by which
agreements, competitive considerations, or a large number of
underlying projects limit the amount of detail that can be made
the borrower identifies and manages perceived, actual or available, the GLP recommend that information is presented in
potential environmental and social risks associated with generic terms or on an aggregated portfolio basis (e.g.
the relevant project(s). percentage allocated to certain project categories). Information
Borrowers are also encouraged to: need only be provided to those institutions participating in

•  position the information communicated above within the
the loan.
context of their overarching objectives, strategy, policy and/or Transparency is of particular value in communicating the
processes relating to environmental sustainability; expected and/or achieved impact of projects. The GLP


•  provide information, if relevant, on the alignment of projects
recommend the use of qualitative performance indicators and,
where feasible, quantitative performance measures (for
with official or market-based taxonomies, related eligibility example, energy capacity, electricity generation, greenhouse
criteria, including, if applicable, exclusion criteria, and also gas emissions reduced/avoided, etc.) and disclosure of the key
disclose any green standards or certifications referenced in underlying methodology and/or assumptions used in the
project selection; and quantitative determination. Borrowers with the ability to

•  have a process in place to identify mitigants to known or monitor achieved impacts are encouraged to include those in
potential material risks of negative social and/or regular reports to those institutions participating in the loan.
environmental impacts from the relevant project(s). Such
mitigants may include clear and relevant trade-off analysis
undertaken and monitoring required where the borrower
assesses the potential risks to be meaningful.

3 Management of Proceeds

The proceeds of a green loan should be credited to a dedicated

account or otherwise tracked by the borrower in an appropriate
manner, so as to maintain transparency and promote the integrity
of the product.
Management of proceeds should be attested to by the borrower
in a formal internal process linked to the borrower’s lending and
investment operations for Green Projects. The borrower should
make known to the lenders any intended types of temporary
placement for the balance of unallocated proceeds.
Where a green loan takes the form of one or more tranches of a
loan facility, each tranche(s) applicable to the Green Project(s)
must be clearly labelled, with proceeds of the green tranche(s)
credited to a separate account or otherwise tracked by the
borrower in an appropriate manner. For the avoidance of doubt, a
facility cannot be labelled as green if it includes a green and
non-green tranche(s); the green label applies only to the tranche(s)
aligned to the four core components of the GLP.
The proceeds of green loans can be managed per loan
(loan-by-loan approach) or on an aggregated basis for multiple
green loans (portfolio approach).

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Green Loan Principles February 2023

Review Appendix 1
Where appropriate, it is recommended that borrowers appoint (an) Application to Revolving Credit Facilities
external review provider(s) to assess the alignment of their green loan
The GLP were drafted such that they can be applied to a wide variety of
or green loan programme with the four core components of the GLP. loan instruments, including term loans, contingent facilities and/or revolving
Alternatively, given that the loan market is traditionally a credit facilities.
relationship-driven market and therefore lenders are likely to have One of the fundamental determinants of a green loan is the utilisation of
a broad working knowledge of the borrower and its activities, the loan proceeds, which should be appropriately described in the finance
self-certification by a borrower, which has demonstrated or documents and, if applicable, marketing materials. The use of proceeds
component of a term loan is often easily identifiable. Revolving credit facilities,
developed the internal expertise to confirm alignment of the
however, may not identify in similar detail such green use of proceeds in the
green loan with the key features of the GLP, may be sufficient. legal documentation, but in any case proceeds should be utilised for eligible
Nonetheless, borrowers are recommended to document thoroughly Green Project(s) throughout the lifetime of the revolving credit facility.
such expertise, including the related internal processes and expertise The parties to any proposed green loan taking the form of a revolving credit
of their staff. This documentation should be communicated to facility will need to determine how best to evidence the flow of funds to an
institutions participating in the loan on the basis agreed between the agreed upon Green Project or Green Projects when applying the GLP to such
parties in the legal documentation. When appropriate, and taking into a loan. A revolving credit facility may include a specific green tranche but,
where not possible, a borrower may seek to report to the lenders the use of
account confidentiality and competitive considerations, borrowers any revolving borrowings and/or identify Green Projects supported by the
are recommended to make publicly available, via their website or revolving credit facility.
otherwise, the parameters on which they assess Green Projects,
Lenders are recommended to monitor and track the sustainability information
and the internal expertise they have to assess such parameters.
provided by the borrower during the life of the loan, mindful of the need to
There are a variety of ways for borrowers to obtain outside input to preserve the integrity of the green loan product. In the absence of sufficient
their green loan process and there are several types of review that internal expertise at the lender to monitor the loan, external review is strongly
recommended. Revolving credit facilities for general corporate purposes
can be provided to the market. Where applicable, borrowers should
should not be categorised as “green” without satisfying the components listed
consult the Guidelines for Green, Social and Sustainability-Linked in the GLP.
Loans External Reviews (Guidelines for External Reviews) for
recommendations and explanations on the different types of reviews.
The Guidelines for External Reviews are a market-based initiative
to provide information and transparency on the external review
processes for borrowers, underwriters, lenders, other stakeholders
and external reviewers themselves.
The GLP encourage external review providers to disclose their
credentials and relevant expertise and communicate clearly the
scope of the review(s) conducted. Where applicable, any external
review should be communicated and made available in a timely
manner to all the financial institutions party to the loan in accordance
with the relevant loan documentation provisions. Where appropriate,
and taking into account confidentiality and competitive
considerations, borrowers should make the external review publicly
available, or an appropriate summary, via their website or otherwise.