Climate Contract Playbook Edition 3
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1. Lenders and intermediaries across the economy (including clearing banks, investment fund managers, specialist financiers and so on) to incorporate SLPs into the decision making and mechanics of how they lend to their customers. 2. Industry bodies such as the LMA to assist in the production, approval and incorporation of model clauses into industry standard/approved documentation. 3. Corporates and borrowing institutions across the economy including businesses (including SMEs and large corporations) and public/publicly backed institutions to agree to incorporate SLPs into their borrowing behaviours, business models and institutional policies. 4. Lawyers and law firms to encourage use of precedent clauses into the drafting of finance documents and an environmentally friendly procedures for documenting the loan (for example, less paper used during a transaction). 5. Government agencies and the Bank of England to support lenders with the backing of sustainability linked loans. These draft clauses are for use in any facility agreement, particularly based on a standard LMA Facility Agreement, which will include a sustainability linked loan. They are designed to incorporate the Sustainability Linked Principles produced by the LMA 65 in May 2020 and provide model drafting for one or more sustainability linked facilities. Ideas for further development: • Development of Information Undertakings and Events of Default related to sustainability linked facilities. • Development of calculations of Margin or other performance related metrics based on sustainability linked targets to incentivise borrowers. • Development of Conditions Precedent and Sustainability Compliance Certificates to include industry standard/recognised documentation or information (for example, ESG4 ratings). • Development of Sustainability Performance Targets with suggested ESG targets for typical corporates.
Stakeholders
Application
Other teams have produced template clauses for use in green loans. When using Casper’s clause, it would be beneficial to consider other relevant clauses including Nozomi’s clause and Harrison’s clause, as well as those in the market.
When using Casper’s clause, it is envisaged that users will incorporate into the SLP principles relevant common language and other market/regulatory concepts/ principles such as the EU taxonomy to create harmony within the market.
The drafting below contains some specific reporting requirements. The parties may wish to provide for the Obligors to provide general ESG information prior to entry into the agreement and/or annually. If so, the parties could agree to the form of questionnaire and set out in the appendix linked to an annual reporting obligation or condition precedent. The example targets provided are indicative only. These can be amended, replaced or supplemented as appropriate to meet a variety of lender portfolio or borrower specific objectives. They must be clearly measurable and capable of verification by the Sustainability Experts without excessive time and costs being incurred, and must include timelines, e.g. reduce X to level A by date M, and to level B by date N.
Notes for users
65 https://www.lma.eu.com/application/files/5115/8866/8901/Sustainability_Linked_Loan_Principles_V032.pdf
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