Updated principles regulating green, social, and sustainable loans by the loan market association

The Loan Syndications and Trading Association (the LSTA), the Loan Market Association (the LMA) and Asia Pacific Loan Market Association (the APLMA) have published on 26 March 2025 revised versions of the Green Loan Principles (GLP), Sustainability-Linked Loan Principles (SLLP) and Social Loan Principles (SLP, together with the GLP and SLLP, the Principles), alongside updated guidance documents.

Each of the Principles and related guidance were last updated on 23 February 2023, and the past years have experienced considerable growth in the space of labelled loan. These updates are also part of the wish to better regulate this market, in view of the recent greenwashing initiatives that have quickly developed across the UK and the EU¹.

In this article we provide a brief snapshot of the key changes, which are mainly aimed at clarifying the scope of existing set of Principles rather than recasting them.

Interpretation of terms

With the aim of providing clear guidelines on the interpretation of the language of the Principles, the updated Principles implement a new provision detailing which provisions of the Principles constitute mandatory requirement, recommendation, option course of action, or possibility offered to the parties:

• “Shall” denotes a mandatory requirement.
• “Should” indicates a recommendation.
• “May” and “Can” represent optional course of actions or suggestions.

Whilst this interpretation language does not introduce any material changes to the Principles, it helps ensuring that all market participants have a clear and shared understanding of the Principles.

It is now clearly indicated, as a fundamental and non-negotiable principle, that green or social projects shall deliver clear environmental or social benefits, which the borrower shall assess and, where feasible, quantify.

The other mandatory requirements mainly relate to reporting and information disclosure. For instance, the Principles now provide that the Borrower shall make and keep readily available up-to-date information on the use of proceeds, until the relevant loan has been fully allocated.

Another example is that the SLLP now indicate that Sustainability Performance Targets shall be ambitious (whilst it was previously indicated that the KPIs “should” be ambitious).

2023 “grandfathering” language

The Principles previously included a “grandfathering” language, pursuant to which transactions completed prior to 9 March 2023 were exempt from the updates made to the Principles.

As indicated by the LSTA, this language was a source of uncertainty for the market, in particular for transactions which were ongoing at the time of publication of revised versions of the Principles, or transactions which included a rendez-vous clause for the parties to meet to discuss KPIs.

The updated Principles apply equally to all loan transactions, regardless of when originated, extended, or refinanced.

Changes specific to GLP

The GLP confirms that a loan that intentionally mixes eligible Green and Social Projects can be referred to as a “Sustainability Loan”.

It also clarifies the distinction between green and blue loans. A blue loan is specifically aimed at promoting the sustainable use and conservation of water resources. Blue loans are also green loans if aligned with the four core components of the GLP.

An updated indicative list of eligible Green Projects categories has been provided².

Changes specific to SLLP

The SLLP clarifies that the main objective of sustainability-linked loans (SLLs) is to facilitate the transition toward more sustainable business practices. In particular, the concept of “transition” should not be limited to climate-related efforts.

Whilst margin adjustments remain a key feature of SLLs, they are not the only financial tools as other financial incentives may be implemented on a case-by-case basis.

The documentation explicitly confirms that the information provided by the Borrower does not need to be re-verified under the SLLP if it has already been validated through public annual reports or regulatory disclosures.

Finally, an SLL should be closely integrated with a borrower’s overarching sustainability strategy. To this end, borrowers are encouraged to build on existing sustainability initiatives to reinforce and guide their financing decisions.

Footnote

1. As explained by the LMA in its first-ever “sustainable finance insights report on greenwashing: understanding and navigating the impacts for the loan market” that has been published in March 2025.
2. Renewable energy; Energy efficiency; Pollution prevention and control; Environmentally sustainable management of living natural resources and land use; Terrestrial and aquatic biodiversity restoration, conservation, and enhancement; Green technologies; Sustainable water and wastewater management; Climate change resilience and adaptation; Circular economy adapted products, production technologies and, processes and business models; and Green buildings.