Green Loan Principles Feb 2023
Green Loan Principles Feb 2023
Green Loan Principles Feb 2023
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
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Green Loan Principles February 2023
• 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
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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.