On 11 February 2021, the Loan Market Association (LMA), together with the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA), published updated versions of the Green Loan Principles (GLP) and Guidance on Green Loan Principles (GLP Guidance).
The GLP set out a framework of market standards and voluntary guidelines that market participants are encouraged to apply on a deal-by-deal basis.
The GLP and GLP Guidance have now been updated as follows:
- The updated GLP now includes social risks as one of the categories to consider during project evaluation.
- The GLP Guidance now includes a section describing how borrowers should seek to mitigate adverse environmental and social aspects associated with the implementation of proposed projects.
The shipping market has started to embrace the GLP. For example, earlier this month Hapag-Lloyd announced that it had concluded two transactions which fulfilled the GLP. One is a $417m loan from a syndicate of 11 banks (including KfW IPEX-Bank and BNP Paribas) and backed by K-SURE. The other is a $472m lease financing structured by ICBC Leasing. A second party opinion was obtained from an independent expert at DNV GL to verify that both financings fulfilled the GLP.
You can read more about environmental and social governance in relation to loans in our client alert.
Originally published in 2018, the GLP comprises voluntary recommended guidelines that seek to promote integrity in the development of the green loan market by clarifying the instances in which a loan may be categorised as “green”.