About
The main feature of the Principles is that the borrower's sustainability development is measured by using 'Sustainability Performance Targets' ('SPTs'), which are negotiated and pre-agreed between the borrower and the lender(s). This enables lenders to incentivise borrowers to improve their sustainability profile and performance by aligning loan terms to the borrower’s performance against the pre-determined SPT benchmarks.
Examples of Sustainability Performance Targets are improved water savings or energy efficiency, an increased use of renewable energy sources or a reduction of greenhouse gas emissions. But the SLLP is not a determinant in its categorisation. The Principles are intended to be applied by market participants on a deal-by-deal basis.
Who does it impact?
Developed by three major loan associations, the Principles have broad market acceptance and affect common practice in the sector. Deal-by-deal implementation entails that actors are impacted in the extent to which they agree upon.
The Principles may have an impact on the banking industry by forming market practice where borrowers are incentivised to improve their sustainability performance.
Status: Launched
Originally published in March 2019 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).
A latest version of the Principles was published in March 2025. The APLMA, LMA and LSTA have developed a guidance as well to be read alongside the SSLP.
Relation to other initiatives and regulations
The three major loan associations behind the SLLPs (the Loan Market Association (LMA), the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA)) have also developed the Green Loan Principles.
Participants
The guidelines are applied by market participants on a deal-by-deal basis.
Thommessen's comments
Whereas green loans (Green Loan Principles) are given to finance green projects, Sustainability Linked Loans do not limit the purpose of the loan to certain projects or investments and are typically used for general corporate purposes. SLLs aim at a broad market use by measuring the borrower’s performance against the predetermined sustainability performance targets (SPTs), which allows access to a wider range of companies focusing on the importance of sustainable strategy.
By linking the loan terms to the borrower’s sustainability performance and rewarding the company when the targets set out in the SPTs are achieved (e.g. by reduction of the loan’s interest rate), the borrowers have an incentive to be in alignment with the SLL Principles. This will further contribute to a sustainable and environmental economy activity and growth. In our view, the Sustainability Linked Loan Principles provide a framework that allows for the flexibility of the loan product to be maintained. In particular, the SPTs are negotiated and set by the borrower and lender group for each transaction. Since the SPTs are tailored to the borrower’s business, they should therefore be easy to implement and comply with.