Climate Contract Playbook Edition 3
117
[Harrison’s clause]
The Origin Story
Child’s name
Harrison’s clause
Full name
Green Loan “Starter Pack”
Practice Area / Sector
Finance
There is significant shortfall in funding to meet the UN Sustainable Development Goals 58 . The UK will need to mobilise large volumes of capital investment in clean energy and sustainable infrastructure to meet our Net Zero obligations 59 . There is a general absence of publicly available template wording available for use in green loans. More green loans need to be issued to mobilise green finance. A form of commonly used and widely accepted green loan clauses that are aligned to the Green Loan Principles by reference to Loan Market Association (LMA) style drafting. Green loan frameworks (such as the Green Loan Principles) (as defined below) exist that provide high-level principles that support the development and integrity of green loan products. Currently, sophisticated financial institutions that are capable of designing tailored documentation aligned to green loan frameworks are most familiar with such green loan documentation. However, this has created a demand gap in which borrowers that are unfamiliar with green finance or green loans may generally fall into. The availability of a standardised set of green loan terms by reference to the existing Green Loan Principles should make green loan products accessible to a broader sweep of borrowers and increase demand from borrower-side finance requests, thus mobilising more green finance to fight climate change. Borrowers and their counsel will benefit from market standard drafting establishing how the Green Loan Principles can be applied to market standard loan facilities from both a commercial and a legal perspective. In addition, lenders and their counsel will benefit from a clear framework for monitoring the adherence of borrowers to the “green” purposes of the proceeds of the loan thus avoiding the potential for green washing. The key stakeholders that the Green Loan “Starter Pack” is aimed at are: 1. Borrowers (particularly borrowers with limited experience of “green” products or green finance) 2. Precedent and Know-How providers 3. Private practice firms 4. Professional support lawyers 5. Lenders
Issue
Solution
Context
Impact
Stakeholders
58 https://www.undp.org/content/undp/en/home/blog/2017/7/13/What-kind-of-blender-do-we-need-to-finance-the-SDGs-.html 59 https://publications.parliament.uk/pa/cm201719/cmselect/cmenvaud/617/61704.htm
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