Sustainable Loan Principles Updated

On 26 March 2025, the loan trade associations published updated versions of the Green, Social and Sustainability-Linked Loan Principles (together, the Loan Principles) and related guidance material. The changes on this occasion are mostly clarificatory in nature (and more limited than in previous years), but there are some changes which are noteworthy for borrowers which use these products or may be considering doing so. We have summarised the headline points below, with further detail available in our two new briefings on the latest updates – 2025 updates to the Green and Social Loan Principles and 2025 updates to the Sustainability-Linked Loan Principles.  

• Clearer differentiation between mandatory requirements, recommendations and options. A new interpretation section at the outset of each set of Loan Principles clarifies the wording that denotes a mandatory requirement, a recommendation, an option and a possibility, and the wording of each set of Loan Principles has been reviewed and re-cast accordingly. The resulting changes, in particular in terms of requirements that are now clearly expressed as mandatory, are largely reflective of current market practice, although they will warrant attention from borrowers with new transactions in the pipeline and transactions coming up for refinancing.  
   
• Removal of grandfathering protection. Grandfathering language was added to the Loan Principles as part of the previous round of updates in February 2023 to clarify that for existing transactions and transactions which were “in flight” as the updated Loan Principles were published, alignment with the version of the relevant Loan Principles in force when the transaction was originated/completed was sufficient for the purposes of the relevant label. This language has now been removed. This may have limited practical significance for transactions currently “in flight” given the nature of the latest changes. The implications for pre-existing loans structured and originated in line with the previous version of the relevant set of Loan Principles will, however, have to be considered on a case-by-case basis.
   
• Adjustments to the Eligible Project categories in the Green and Social Loan Principles. The list of eligible Green/Social project categories has been refreshed and refined as part of the latest round of updates to the Green/Social Loan Principles.  While the list is carefully described as indicative and high level, the identified categories are often the bedrock of lenders’ green/social loan frameworks, with decisions on alignment with the Green/Social Loan Principles for any type of project that is not clearly subsumed in one of these categories typically requiring careful thinking and debate. The latest changes, which bring up-to-date and provide additional colour as to what falls into each category, are therefore likely to be viewed as helpful.  
   
• Refinement of criteria for the selection of KPIs and SPTs in the Sustainability-Linked Loan Principles. A range of detailed changes have been made to the Sustainability-Linked Loan Principles to bring the criteria for KPI and SPT selection into clearer focus and importantly, underline key contextual factors such as the borrower’s broader sustainability strategy and position, and geographic considerations.

There will, of course, be some parties disappointed with the scope of the latest updates to the Loan Principles, concerned that particular points of detail have not been addressed and/or that the changes do not go far enough. With each iteration of the Loan Principles, however, the scaffolding supporting the integrity of the sustainable loan market becomes stronger and better understood. While the demand for further explanation and clarity from individual parties will no doubt continue, this year’s review further clarifies the requirements of the Loan Principles and explains others, which is a positive step forward. We would also observe that in a year where a number of new reporting requirements are starting to land and/or are being adjusted (the EU Omnibus proposals, for example), it is even more important for the industry to tread carefully so as not to de-stabilise further growth in the sustainable loan market.