The market for sustainability-linked loans (SLLs) has developed rapidly since the Sustainability-Linked Loan Principles were first published by the LMA, APLMA, and LSTA in 2019. For the first time, we had a sustainable finance instrument which was accessible to any company prepared to develop a sustainability strategy.

However, one of the issues was that the Principles were just that - principles. It was up to market participants, and in particular their lawyers, to add in the relevant drafting provisions to ensure that the facility was compliant. In the absence of any market standard drafting, we saw different approaches take hold in documentation.

Certain aspects of an SLL are necessarily bespoke, particularly in relation to Key Performance Indicators and Sustainability Performance Targets. However, there are clear efficiencies to be had in having settled market-standard drafting for other elements - for example, the margin ratchet.

Following in the footsteps of the LSTA, which released its SLL drafting for the US market in February 2023, the LMA has just published its own SLL drafting. Whilst it is not, and cannot be, all things to all people, it's a huge step forward in bringing efficiency to this growing market.

Take a look at our recent summary of how the LMA's SLL drafting works, and a list of potential negotiating points.