Anna's Clause

Climate-Related Disclosure in Loans

A generic reporting/disclosure clause that can be included in the Loan Market Association (LMA) information and undertakings provisions of any corporate loan and is not limited to 'green' loans.

Jurisdiction: England & Wales

What this clause does

Encourages borrowers to consider their climate-related risks, mitigation opportunities and impacts (and also to prompt borrowers’ corporate and social responsibility (CSR)/sustainability teams to interact more with their finance colleagues). The clause also encourages lenders to consider their own climate-related risks and impacts and comply with their reporting obligations.


[Drafting note: Using this clause in Loan Market Association form documents: While this clause can be used in recommended form documents published by the LMA, it has not been endorsed by, or produced in conjunction with, the LMA. Using and reproducing LMA documents generally are subject to certain restrictions, specifically they may only be used by LMA members for preparing and documenting agreements relating to transactions or potential transactions in the loan markets. Further information is available on the LMA website -]

[Drafting note: Reporting regimes: This clause deliberately only addresses reporting requirements in relation to Climate-Related Risks and would ideally be used in conjunction with other TCLP clauses that cover contract emissions reduction and reporting relating to all scopes of emissions and/ or require that suppliers meet organisational emissions reductions targets.]

1. Reporting of Climate-Related Risks and Mitigation

1.1 The Company shall supply to the Agent, with (or as part of) each annual report: 

1.1.1 a report containing the following information, in a form and substance [satisfactory to the Agent]/ [agreed between the Company and the Agent]*:

(a) details of the processes and procedures implemented by the Company to identify, assess and manage Climate-Related Risks impacting the business, strategy and financial planning of the Company; and

(b) details of actual or potential impacts of Climate-Related Risks which shall include (without limitation) the assessment of:

(i) Physical Risks of climate change affecting the business operations of the Company and the value of the Company’s assets (including without limitation its commercial property); and

(ii) Transition Risks associated with the transition to a Net Zero economy,

and any step(s) being taken to address or mitigate such risks.

(c) details of processes, procedures and any targets implemented by the Company to (a) contribute to or (b) mitigate any harm to the following environmental objectives:

(i) Climate Change Mitigation;

(ii) Climate Change Adaptation; 

(iii) Sustainable Water and Marine Resource Use;

(iv) transition to a Circular Economy;

(v) Pollution Prevention and Control; and

(vi) Biodiversity Protection,

(together, the Environmental Objectives).

* [Drafting note: In some instances borrowers may already voluntarily comply with Environmental, Social or Governance (ESG) reporting standards which cover the material covered by this clause. In these cases, borrowers may be reluctant to agree to disclosure obligations imposed by lenders which result in duplicating work. It may therefore increase the uptake of this clause if the optionality that the borrower and agent can agree on the form and substance of the report is included.]


Biodiversity Protection means the protection, conservation and restoration of biodiversity and ecosystems, including, without limitation, by way of protection of natural or semi-natural habitats, species, terrestrial, marine and other aquatic ecosystems; sustainable land use and management; halting or preventing of agricultural practices which contribute to the degradation of soils and other ecosystems, deforestation and habitat loss; or enabling of practices which contribute to sustainable forest management and uses of forests and forest land that contribute to enhancing biodiversity. [Drafting note: This definition is based (loosely) on Article 15 ‘Substantial contribution to the protection and restoration of biodiversity and ecosystems’ of the EU Taxonomy Regulation.]

Circular Economy means an economy in which there is a reduced demand for natural resources, and the materials that are derived from them.* This is achieved by activities that contribute, directly or indirectly, to increasing resource efficiency and decreasing environmental impacts throughout value chains. [Drafting note: See the EC report: Categorisation system for the circular economy.]

* [Drafting note: The first sentence of this definition is taken from the LMA Green and Sustainable Lending Glossary of Terms.]

Climate Change Adaptation means the process of adjustment or preparation of natural or human systems to the actual or anticipated climate and its effects in a way that moderates harm or exploits beneficial opportunities.

Climate Change Mitigation means human intervention or efforts to reduce the sources and enhance the sinks of Greenhouse Gas Emissions.

Climate-Related Risk means Transition Risk and Physical Risk. [Drafting note: The definitions of Physical Risk and Transition Risk are adapted from the descriptions of these terms in PRS SS3/19.]

Greenhouse Gas (GHG) Emissions means emissions of the greenhouse gases that trap thermal radiation in the earth’s atmosphere. They are specified by the United Nations Framework Convention on Climate Change (UNFCCC) in Annex A to the Kyoto Protocol and may be updated periodically. 

Net Zero means when the anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period. Where multiple greenhouse gases are involved, the quantification of net zero emissions depends on the climate metric chosen to compare emissions of different gases (such as global warming potential, global temperature change potential, and others, as well as the chosen time horizon). [Drafting note: This definition has been taken from the LMA Green and Sustainable Lending Glossary of Terms.]

Physical Risk means physical risk from climate change arising from a number of factors, and relating to specific weather events (such as heatwaves, floods, wildfires and storms) and longer-term shifts in the climate (such as changes in precipitation, extreme weather variability, sea level rise, and rising mean temperatures).

Pollution Prevention and Control means preventing or reducing pollution including without limitation by way of reduction of pollutant emissions into air, water or land (other than greenhouse gases); improvement of levels of air, water or soil quality; or the reduction of any adverse impact on human health and the environment of the production, use or disposal of chemicals. [Drafting note: This definition is based (loosely) on Article 14 ‘substantial contribution to pollution prevention and control’ of the EU Taxonomy Regulation.]

Sustainable Water and Marine Resource Use means protecting or improving the qualitative and quantitative status of bodies of water and marine waters including without limitation by protecting the environment from the adverse effects of urban and industrial waste water discharges, ensuring that water is free from any micro-organisms, parasites and substances that constitute a potential danger to human health as well as increasing people’s access to clean drinking water and protecting, preserving or restoring the marine environment. [Drafting note: This definition is based (loosely) on Article 12 ‘substantial contribution to the sustainable use and protection of water and marine resources’ of the EU Taxonomy Regulation.]

Transition Risk means transition risk from climate change arising from the process of adjustment towards a low-carbon or Net Zero economy. A range of factors influence this adjustment, including climate-related developments in policy and regulation, the emergence of disruptive technology or business models, shifting sentiment and societal preferences, or evolving evidence, frameworks and legal interpretations. This includes (without limitation) the impact on the demand for the products and/ or services offered by the Company and the financial cost of compliance by the Company as a result of a change in law and regulation facilitating such economic transition. 

[Drafting note: Capitalised terms relate to either a defined term in this clause or a defined term in the main agreement that this clause is designed to be inserted into.]


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