Green Loan Principles launched in complement to bond growth

Green Loan Principles that will provide the first sustainability framework for the syndicated loan market were launched on Wednesday by the LMA and the APLMA, complementing the Green Bond Principles to support a market that could boost climate-related funding.

The Green Loan Principles (GLP) were launched by the Europe-based Loan Market Association (LMA) and the Asia Pacific Loan Market Association (APLMA) with the support of the International Capital Market Association (ICMA), which runs the Green Bond Principles (GBP). The GLP build on and refer to the GBP, the LMA said, with a view to promoting consistency across financial markets.

“This widely supported initiative marks an important first move towards establishing a framework for green lending across global wholesale markets,” said Clare Dawson, LMA chief executive (pictured above, left). “The LMA will continue to work with market participants and other trade bodies to expand the range of loan products that can follow the GLP and thereby provide an alternative way of funding to a wider range of borrowers.”

The loan associations said the aim of the GLP is to create a high-level framework of market standards and guidelines, providing a consistent methodology for use across the wholesale green loan market, whilst allowing the loan product to retain its flexibility.

Like the GBP, the GLP are based on four core components: use of proceeds; process for project evaluation and selection; management of proceeds; and reporting.

The GLP were developed by a working group also including banks active in green loans, and with assistance from the Association of Corporate Treasurers and the European Banking Federation. The need for such a framework was last year flagged by the Global Green Finance Council (GGFC).

“This is an important initiative to broaden the range of sustainable financial products to fund the urgently needed projects being undertaken by our clients to support the transition to a low carbon economy,” said Jonathan Drew, chair of the APLMA green loan committee and managing director of the infrastructure and real estate group of HSBC Global Banking & Markets (pictured above, right).

“A broad group of banks and professional service providers across the region have made significant contributions to this initiative in close cooperation with the LMA and with tremendous support from ICMA.”

At the Climate Bonds Initiative 2018 conference on Tuesday, green loans featured prominently in discussions, with several market participants highlighting the growing role they can play in supporting climate finance.