About
Green loans are any type of loan instrument made available exclusively to finance or re-finance eligible 'Green Projects'. The Green Loan Principles set out recommended guidelines intended to clarify the instances in which a loan may be categorised as 'green'. These guidelines are based on four core components:
- Use of Proceeds
- Process for Project Evaluation and Selection
- Management of Proceeds
- Reporting
The Green Loan Principles are intended for broad market use by providing a framework that allows for the flexibility of the loan product to be maintained.
Who does it impact?
Developed by three major loan associations, the Principles have broad market acceptance and affect common practice in the sector. Nonetheless, deal-by-deal implementation entails that actors are impacted in the extent to which they agree upon.
Status: Launched
The Green Loan Principles were launched on 21 March 2018 by the Loan Market Association (LMA) (covering Europe, Middle East and Africa), the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA), with the support of the International Capital Market Association (ICMA). The Green Loan Principles were updated in March 2025, together with an associated Guidance on Green Loan Principles.
Relation to other initiatives and regulations
The Green Loan Principles build on and refer to the Green Bond Principles of the International Capital Market Association, see e.g. the listed categories of eligible 'Green Projects'.
The three major loan associations behind the Green Loan Principles (the Loan Market Association (LMA), the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA)) have also developed the Sustainability Linked Loan Principles. The main difference between these two sets of principles is that where so-called "Green Loans" are given to finance eligible green projects, Sustainability Linked Loans do not limit the purpose of the loans to specific projects or investments.
Participants
The voluntary recommended guidelines may be applied by market participants on a deal-by-deal basis.
Thommessen's comments
In our view, the Green Loan Principles may contribute to accelerate the demand for sustainable finance and green investment products.
The Principles define green loans as 'any type of loan instrument made available exclusively to finance or re-finance, in whole or in part, new and/or existing eligible Green Projects'. A list of eligible Green Projects is set out in an Appendix 1 to the Green Loan Principles, which include the same broad categories of eligible 'Green Projects' as the Green Bond Principles do for green bonds.
Although the Green Loan Principles explicitly recognise several broad categories of eligible 'Green Projects', the Principles do not provide details on what qualifies as "green" and the more specific definitions are left to the issuer to determine. In this regard, we see more clear and legally binding definitions regarding which economic activities qualifies as "sustainable" or "green" in the recent development of an EU Taxonomy, and expect to see it in the future, e.g. resulting from the on-going work related to the EU Commission Action Plan on Sustainable Finance.