It pays to be sustainable – a new cornerstone for the green revolution

White & Case LLP

White & Case LLPGovernments and multilaterals alone cannot finance the transition to a sustainable, low-carbon economy: the world's savers (via the banks and bond market) represent the only pool of capital deep enough. The OECD estimates that $6.9tr of sustainable investment is needed by 2030 to meet the goals set out in the 2015 Paris Agreement.  To date, the green bond market has not been inclusive enough to permit investment of the required scale: we need a more effective mechanism, the Sustainable CLO, to connect the bond market to sustainable debt around the world while simultaneously providing the banks with additional capital for sustainable projects.1

A recent development in the loan market looks set to provide a key building block to scaling up sustainable finance and provide flexible funding solutions to all types of borrowers. Hot on the heels of the first Green Loan Principles in 2018 and in light of the increasing popularity and borrower diversity in the green loan market (see Fig. 1), the first ever Sustainability-Linked Loan Principles ("SLLPs") have been published by the Loan Market Association ("LMA"), the New York-based Loan Syndicated and Trading Association ("LSTA") and the Asia Pacific Loan Market Association ("APLMA").

Figure 1: Global Green and ESG Loan Volume (Source: LMA)

What's new?

Sustainability-Linked Loans ("SLLs") will operate dynamically as both a 'carrot and a stick' with the interest rate of the SLL increasing (stick) or decreasing (carrot) to reflect changes to the sustainability rating of the borrower.

The publication of the SLLPs marks a change in approach compared to the 'use of proceeds' model which requires loan proceeds to be used for specific sustainable projects. Unlike conventional green 'use of proceeds' loans which solely revolve around the sustainable use of the loan monies, sustainability-linked loans are tied to the overall sustainability profile of the borrower, and provide a financial incentive (through decreasing costs of funds) as they improve their overall sustainability profile.

SLLs must feature the following:

  1. Relationship to borrower's overall corporate social responsibility strategy. Comparable to a company's Green/ Sustainable Framework in the context of a green use of proceeds loan or bond, the borrower should be able to link the proposed SLL to their overarching CSR/ ESG strategy.
  2. Target setting – measuring the sustainability of the borrower. This is the key substantive element of the SLLPs. For this tenet, the borrower sets the parameters through which the 'success' or 'failure' of the company to meet its sustainable goals, and the quantitative metrics determining whether the borrower will be rewarded or penalised through the loan's variable interest rate. Targets are set with reference to so-called Sustainability Performance Targets "SPTs". A none-exhaustive list of common SPTs is provided in Schedule 1 of the SLLPs, but these can be flexibly tailored according to the borrower's specific industry and circumstances.
  3. Reporting. The monitoring and reporting of data relating to the SLL borrower's sustainability is essential to the success of the SLL as a product, given that the accuracy and completeness of this data will have real and direct financial implications for the contracting parties. It will also be invaluable for allowing investors of SLL loan portfolios to verify the continuing sustainability credentials of their investment.
  4. Review. Verification of the sustainable credentials of labelled SLLs is arguably even more important in the context of sustainable loans as it is for bonds. In contrast to publicly traded bonds, loans are generally bilateral instruments which are less transparent and susceptible to 'green-washing' given that a key benefit for the lending bank is the reputation boost associated with being named as an SLL lender. Independent reviewers will ensure that the integrity of the SLL brand is maintained.

Why enter an SLL?

Financial and reputational incentives

SLLs provide both financial and sustainable benefits to loan counterparties. For borrowers, the SLLs provide a cheaper cost of capital for making a positive impact on the environment, in addition to the secondary incentives associated with becoming more sustainable, e.g. lower overheads due to increased energy efficiency. For lenders, SLLs present an opportunity to boost their reputation and demonstrate compliance with their commitments to increase sustainable lending, some of which runs into the hundreds of billions. Data has shown that sustainable loan assets have lower default rates than their conventional alternatives and a 'greenium' is beginning to materialise3. The most significant potential benefit of the emergence of SLLs is that they will provide the ideal collateral to be aggregated into sustainable CLOs ("SCLOs"), thereby connecting the bond market to the asset class4.

Regulatory future-proofing

The global regulatory environment5 appears to be heading towards increasing obligations relating to disclosure of environmental (and other ESG) impacts at the company level and showing adaptability to a 2-Degree Scenario6. Participating or investing in SLLs would provide an easy way of demonstrating support for  transitions to a low-carbon economy, as well as greening investment portfolios to ensure readiness to take advantage of any regulatory incentives for holding sustainable assets. The reporting obligations for SLLs will provide a valuable segue for companies to begin making environmental disclosures, establishing best practices as well as their market position as a sustainable company before such disclosure obligations become mandatory.


SLLs could address one of the most-cited criticisms of sustainable use of proceeds loans and bonds: lack of additionality. This is the concept that proceeds, while nominally allocated to sustainable purposes, are not making any additional progress towards preventing climate change, e.g. by refinancing existing green assets, or simply maintaining an existing level of sustainability for 'pure-play' companies and projects whose activities are all inherently sustainable. SLLs provide an active incentive for companies or institutions to improve – not just maintain - their sustainability profile wherever they currently sit on the sustainability spectrum. This means companies and institutions who are just beginning their transition away from an unsustainable business model or assets are not stigmatised, (as some have been in the green bond market), and are provided the necessary access to funding to start their transition to sustainability. SSLs can also incentivise pure-play companies and projects to find new ways to make a positive additional impact on the environment by taking advantage of the financial incentives SLLs offer.

Inclusivity for revolving credit facilities and SMEs

SLLs also widen the categories of loans, which can be considered sustainable. Until the SLLPs were published, the concept of a revolving credit facility was incongruous with the Green Loan Principles ("GLP"), since the use of proceeds could not easily be tracked into specific green projects in the way the GLP require. Borrowing under a revolving credit facility often makes the most commercial sense for small and medium sized companies in particular, who need loan monies for general corporate purposes and are not able to earmark funds for specific large-scale projects. The SLLPs do not require specific monies to be tracked – they only require the overall sustainability profile of the borrower to be measured using pre-agreed metrics and verification processes. The sustainability market is now open to a much broader range of potential participants and deal structures, which will may help provide funding to sectors or projects that have not been able to access to sustainable funding through green bonds and other sustainable finance methods.

Primed for SCLOs

For the bond market, the publication of the SLLPs is a welcome development as asset certification thereunder will provide valuable transparency that the associated loans meet internationally accepted standards of sustainability. As mentioned above, this means they can readily form the collateral for SCLOs. These structures are vital to the scaling up of the sustainable finance market by connecting deep pools of institutional investor capital in the bond market with sustainable investments at the micro level, while maintaining the economy of scale and transparency such investors require. Once the size of a lender's SLL portfolio has reached a critical mass, they can sell it to a CLO vehicle, clearing their balance sheet and making way for the next wave of SLLs to be extended, creating a Sustainable Finance Loop (see Fig. 2). The data reporting obligations associated with certified SLLs mean that investors in SLL-backed SCLOs will have ongoing comfort that the assets underlying their investments continue to meet minimum sustainability requirements.

SSLs can play a role in funding the huge pipeline of renewable projects

Many companies and institutions continue to make good progress toward sustainable growth and transition to low-carbon economies, setting new sustainability and resilient infrastructure targets that are creating demand for capital and new sustainable funding methods.  SLLs can provide funding for new and ongoing investments in sustainable projects. The expected rise in global renewable energy capacity is not the only development that could turn to SLLs for a source of sustainable finance, almost equal amounts of sustainable funding is needed in both the infrastructure and the real estate sectors, making both energy and construction leaders in the market7. Companies and institutions in these sectors have started examining their sustainability performance or the sustainability and impact of their projects for environmental and climate risks and they see SSLs as a way to reduce these risks and obtain finance at the same time.

The key to scale?

The SLL market has lower entry barriers than the green bond market8 and is open to companies of all sizes from SMEs to multinationals. Some lenders already internally allocate sustainability ratings to their loan portfolios, and many more lenders could find that upon analysis of their existing portfolios, it may not prove onerous to re-categorise existing loans as SLLs, much like some market participants have done to great effect in the green bond market. Existing green bond issuers and organisations adhering to reporting recommendations9 for monitoring and reporting on sustainability will find that they already have full capacity to borrow or lend under SLL terms.

SLLs present opportunities for all market participants and look set to provide a prime supply of assets to feed into SCLOs, which are the key to supplying the gargantuan amount of sustainable finance required to achieve the goals mandated by the Paris Agreement. The SLLPs have unlocked a powerful new tool for seasoned sustainable financiers and newcomers to the market alike.

1 Global green bond issuance in 2018 was only $167.6bn

4 For further information about SCLOs please see the G20 white paper on SCLOs which was co-authored by White & Case:

5 See the Non-Financial Reporting Directive and
6 The 2-Degree Scenario or 2DS was a term popularised in the Paris Agreement of 2015, referring to a scenario in which we limit global increases in temperatures since pre-industrial times to 2 degrees centigrade. An increase in temperature of 2 degrees is the crux point beyond which the effects of climate change are said to become irreversible.
7 Overall, according to the Climate Bonds Initiative's January 2019 report, "Financing Low Carbon Buildings with Green Bonds," $126 billion had been allocated to low-carbon building assets and projects as of end-November 2018.
8 In terms of deal size and the extra regulation related to issuing securities.
9 Such as the non-financial reporting directive and the TCFDs:

Alexander Buchanan (White & Case, Professional Support Legal Assistant, London) contributed to the development of this publication.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© White & Case LLP | Attorney Advertising

Written by:

White & Case LLP

White & Case LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.