In the later stages of the global pandemic, the importance of a green recovery has been emphasised across the globe, and ESG principles have permeated almost every aspect of life, including the financial markets. However, the acronym ESG has an enormously wide scope: where the move to net zero carbon emissions may be a longer term aspiration for some industries, movement towards smaller scale environmental improvements and on the social and governance side may be far more achievable.
As Mark Carney said in 2019:
“Achieving net zero emissions will require a whole economy transition – every company, every bank, every insurer and investor will have to adjust their business models…this isn’t about funding only deep green activities or blacklisting dark brown ones…We need fifty shades of green to catalyse and support all companies toward net zero.”
This sentiment is being reflected in the nuances of much of the legislation, regulation and “soft law” being established now. The development of sustainability-linked loans to sit alongside the more mature green loans market has been one of the success stories of recent years. These are loans for general corporate purposes, which usually have a relatively small incremental pricing benefit for reaching certain targets. In contrast, the narrower green loan products are intended for use in a dedicated ESG project, with a mandated ESG-related use of proceeds.
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Please do speak to one of our team to discuss if helpful, and to see how sustainability-linked loans, or other ESG requirements, may be relevant for your business.
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The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.