--- title: Green Loan “Starter Pack” date: 2024-03-27T14:17:01Z modified: 2025-07-23T11:22:11Z permalink: "https://chancerylaneproject.org/clauses/green-loan-starter-pack/" type: clause status: publish excerpt: "" wpid: 2153 jurisdiction: - England & Wales maintenance-status: - Not maintained practice-area: - Banking and finance clause_child_name: "Harrison's Clause" clause_summary: "

Green loan clauses that are aligned to the Green Loan Principles (as defined below) by reference to Loan Market Association (LMA) style drafting.

" clause_last_updated_date: 2021-09-28 related_clauses: false --- ## Child’s name Harrison’s Clause ## Summary Green loan clauses that are aligned to the Green Loan Principles (as defined below) by reference to Loan Market Association (LMA) style drafting. ## What this clause does Market standard wording to make finance accessible to borrowers unfamiliar with green loans, increasing the financing of eligible green projects. Designed as a base to be tailored in commercial and legal negotiations, it is widely applicable rather than transaction specific. Lenders will benefit from a clear monitoring framework to prevent greenwashing. ## Clause Content _\[Drafting note: Using this clause in Loan Market Association form documents: While this clause can be used in recommended form documents published by the Loan Market Association (_**_LMA_**_), it has not been endorsed by, or produced in conjunction with, the LMA. Using and reproducing LMA documents generally are subject to certain restrictions, specifically they may only be used by LMA members for preparing and documenting agreements relating to transactions or potential transactions in the loan markets. Further information is available on the LMA website –_ [_www.lma.eu.com_](http://www.lma.eu.com).\] **Principle One: Use of proceeds** 1.1 Typical Clause to Review: Purpose (Clause 3 of the LMA Form) **3. Purpose** 3.1 The Borrower shall apply all amounts borrowed by it under the Green Facility towards: (a) The financing of the Eligible Green Project in accordance with the Green Loan Framework; and (b) Payment of the Green Project Costs (other than periodic fees) \[as described in the Funds Flow Statement\]. **Principle Two: Project evaluation and selection** 1.2 Typical Clauses to Review: Conditions to Utilisation (Clause 4 of the LMA Form), Part IB of Schedule 2 (Conditions Precedent) of the LMA Form and/ or Conditions Subsequent (Clause 28.41 of the LMA Form) **3. Finance Documents** (a) The Green Loan Framework executed by the Parent and any other member of the Group party thereto. **7. Other Documents and Evidence** (a) A certificate of the Parent (signed by a director) detailing the estimated Green Project Costs and certifying that the Green Project Costs have been applied or will\[, simultaneously with the first utilisation under this Agreement\] be applied for the same purposes as the proceeds of the Green Facility. (b) A copy of the Borrower’s and/ or the Group’s environmental sustainability strategy materials (to the extent not already included in the Green Loan Framework). (c) \[A Second Party Opinion\]. (d) \[The Certification\]. **Principle Three: Management of proceeds** 1.3 Typical Clause to Review: Representations (Clause 25 of the LMA Form) **25.34** **Green Loan Representations** (a) The Green Loan Framework shall set out: (i) the environmental sustainability objectives of the Borrower in respect of the Eligible Green Project including how the Eligible Green Project furthers the Borrower’s achievement of its Net Zero Target (and of any applicable interim targets), the GHG Emissions reductions estimated to be linked to the Eligible Green Project and plans for offsetting those emissions; (ii) the process by which the Borrower determines how the Eligible Green Project aligns with the Eligibility Criteria; and (iii) any related eligibility criteria, including, if applicable, exclusion criteria, or any other process applied to identify and manage potentially material environmental risks associated with the Eligible Green Project. (b) Save as disclosed in writing to the Agent and the Arranger prior to the date of this Agreement the factual information provided by the Borrower as set out in the Green Loan Framework is true and accurate in all material respects as at the date it was provided or (as the case may be) as at the date the information is expressed to be given. (c) The Eligible Green Project conforms to the Eligibility Criteria and Green Loan Framework. (d) The Borrower has an established process to identify and manage potentially material environmental risks associated with the Eligible Green Project. **25.35** **Environmental Representations** (a) It has not been convicted for material violations of any Environmental Law. (b) No material Environmental Claim has been commenced or threatened against it. (c) All information provided by it for the purposes of environmental due diligence by the Lenders is true and accurate in all material respects as at the date such information was provided and is not misleading in any material respect. 1.4 Typical Clause to Review: General Undertakings (Clause 28 of the LMA Form) **28.42 Green Loan Undertakings** (a) The Borrower shall comply with the provisions of the Green Loan Framework in all material respects. (b) The Borrower shall not amend or agree to amend the Green Loan Framework in a way which is materially adverse to the Lenders or which could be reasonably considered to undermine Paris Agreement Goals. (c) The Borrower shall ensure that the proceeds of the Green Facility are credited to a Deposit Account and notified to the Agent and withdrawals from such account are notified to the Agent in accordance with the provisions of Clause 26 (Information Undertakings) by the Borrower. (d) The Borrower shall maintain policies and procedures to enable it to track the allocation of funds towards the Eligible Green Project and to monitor and evaluate the Eligible Green Project on an on-going basis, in accordance with the Green Loan Framework. 1.5 Typical Clause to Review: Group Bank Accounts (Clause 28.34 of the LMA Form). **28.34** **Group Bank Accounts** (a) The Borrower shall ensure that \[by no later than the Closing Date\] \[within \[number of\] days of the Closing Date\] a Deposit Account shall be opened and maintained in the name of the Borrower and shall be designated as a Deposit Account. (b) The Borrower will allocate the proceeds of the Green Facility to the Deposit Account for application in accordance with the Green Loan Framework. (c) Proceeds of the Green Facility not required to be immediately applied in accordance with the Green Loan Framework shall not be invested in any GHG intensive, highly polluting or non-renewable energy \[intensive\] projects. Such unallocated proceeds may: (i) be invested in or refinanced by any \[other green financing instruments\]\[green bonds\] issued in accordance with \[third party green standards\]; or (ii) be invested in money market instruments with a credit rating of \[applicable rating\], until such time as they are applied to the Eligible Green Project in accordance with the Green Loan Framework. 1.6 Typical Clause to Review: Events of Default (Clause 29 of the LMA Form) **29.22** **Green Loan Audits** (a) If the Borrower fails to comply with any of the provisions referred to in: (i) Clause 3.1 (Purpose); (ii) Clause 25.34 (Green Loan Representations); (iii) Clause 26.8 (Green Loan Reporting); (iv) Clause 28.34 (Group Bank Accounts); or (v) Clause 28.42 (Green Loan Undertakings), the Agent (acting on the instructions of the Lenders) may carry out any third party verifications or audits, at the cost of the Borrower, that it considers reasonably necessary to confirm that the Borrower has complied with its obligations under this Agreement. (b) The terms of reference of any audit carried out pursuant to this Clause 29.22 shall be subject to the prior approval of the Agent (acting on the instructions of the Lenders). (c) The findings of any audit carried out pursuant to this Clause 29.22 shall, in the absence of manifest error, be conclusive and binding on all Parties. **29.23 Declassification Events** If: (a) any representation, warranty or statement made or given or deemed to be made or given by the Borrower relating to a Green Loan is or proves to have been incorrect or misleading in any material respect when made or deemed to be made; (b) the Borrower fails to comply with any of the provisions referred to in: (i) Clause 3.1 (Purpose); (ii) Clause 25.34 (Green Loan Representations); (iii) Clause 26.8 (Green Loan Reporting); (iv) Clause 28.34 (Group Bank Accounts); (v) Clause 28.42 (Green Loan Undertakings); or (vi) Clause 29.22 (Green Loan Audits), and if such failure to comply is capable of remedy but not remedied by the Borrower within \[number of\] Business Days (or such longer period as the Agent may agree in writing) of the earlier of (i) the Agent giving written notice of the failure to comply to the Borrower and (ii) the Borrower becoming aware of the failure to comply; or (c) the Certification of the Eligible Green Project is revoked or not renewed by the External Reviewer, each outstanding Green Loan shall be declassified as such by the Arrangers. **29.24** **Consequences of Declassification** From the date on which any Loan is declassified as a Green Loan in accordance with Clause 29.23 (Declassification Events), the Borrower shall, as soon as reasonably practicable and in any event within \[number of\] days of notice from the Agent (acting on the instructions of the Lenders): (a) cease representing in all internal and external communications, marketing or publications that each outstanding Loan is a Green Loan; and (b) ensure that all material, publications and information it publishes relating each outstanding Loan no longer refers to it as a Green Loan. \[For the avoidance of doubt, any breach of this Clause 29.24 in relation to any such Green Loan shall \[not\] constitute an Event of Default.\]\] **29.25** **\[\[No\] Event of Default** The Parties hereby acknowledge and agree that: (a) a breach or failure to comply with: (i) Clause 3.1 (Purpose); (ii) Clause 25.34 (Green Loan Representations); (iii) Clause 26.8 (Green Loan Reporting); (iv) Clause 28.34 (Group Bank Accounts); (v) Clause 28.42 (Green Loan Undertakings); (vi) Clause 29.22 (Green Loan Audits); or (b) a Declassification Event, \[does not\]\[will\] constitute a Default or Event of Default, \[and the Borrower shall not bear any liability to the Finance Parties as a result of the occurrence of any of the foregoing\].\] **Principle Four: Reporting** 1.7 Typical Clause to Review: Information Undertakings (Clause 26 of the LMA Form) **26.7** **Information: Miscellaneous** (a) The Borrower shall supply to the Agent promptly, upon becoming aware of them, details in writing of: (i) any non-compliance with Clause 28.42 (Green Loan Undertakings); (ii) any Environmental Claim against it which is current, pending or threatened; and (iii) any fact or circumstance which may result in any Environmental Claim being commenced or threatened against it. **26.8** **Green Loan Reporting** \[_Drafting note: Consider including requirements here to measure and report on GHG emissions linked to the project._\] (a) \[The Borrower shall promptly, upon receiving the same, deliver to the Agent a copy of the certificate issued by \[accredited sector specific external certification provider\] (certified true by a director of the Borrower) certifying that the Eligible Green Project has been given a rating of at least \[applicable rating\] by \[accredited sector specific external certification provider\] (the **Certification**).\] (b) The Borrower shall from time to time at its own cost and expense supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests) any such relevant information which in the opinion of the Borrower relates to: (i) a material change to the Eligible Green Project financed with the Green Loan; (ii) the Green Loan Framework; and/ or (iii) \[any status of the issuance of the Certification for the Eligible Green Project,\] which, in each case, would reasonably be expected to result in a Declassification Event or the declassification of the Green Loan in accordance with the provisions of Clause 29.23 (Declassification Events). **26.9** **Management Presentations** The directors of the Borrower shall hold \[amount of\] \[meeting(s)\]\[conference calls\] with the Lenders per calendar year at such times and locations as are (a) notified in writing to the Lenders and (b) accepted by the Lenders (acting reasonably) to discuss the contents of the information provided pursuant to Clause 26.8 (Green Loan Reporting). **Schedule A (Green Loan Framework)** This Green Loan Framework sets out how the Borrower will use the Green Loan in the amount of \[amount\] provided by the Lenders under a facility agreement dated \[date\]. The Green Loan raised in accordance with this Green Loan Framework aligns with: 1\. the Eligibility Criteria set out below; and 2\. Paris Agreement Goals. **Eligibility Criteria\*** 1\. Use of Proceeds \[_Description of use of proceeds to be included_\] 2\. Project Selection and Evaluation \[_Description of Eligible Green Project selection and evaluation to be included_\] 3\. Management of Proceeds \[_Description of the management of the proceeds of the Green Facility to be included_\] 4\. Reporting \[_Description of the reporting of the Green Loan to be included_\] The Borrower will notify the Arrangers within \[number of\] Business Days of becoming aware of any failure to comply with this Green Loan Framework. \[The Parties acknowledge and agree that, solely as a result of failure to perform or comply with this Green Loan Framework, no Default or Event of Default will occur.\] \* \[_Drafting note: Include in criteria 1 – 4 specific alignment with Paris Agreement Goals, as relevant. Users of this clause should incorporate the following elements within the criteria:_ - _the concept of doing ‘no significant harm’ to other environmental objectives from the_ [_EU Taxonomy Regulation_](https://eur-lex.europa.eu/eli/reg/2020/852/oj) _(and consider incorporating specific biodiversity related provisions);_ - _a requirement to use the Green Loan in accordance with the principles of a just transition;_ - _criteria for measuring and reporting any residual GHG Emissions related to the project and targets for reducing emissions related to the project (including a percentage rate of year on year decarbonisation where possible);_ - _criteria for offsetting any residual GHG Emissions relating to the project;_ - _any overarching organisational requirements of the Borrower related to ambitious net zero target setting, interim targets, pace of emissions reductions, governance, offsetting, just transition and climate policy engagement (lobbying activities and trade association membership), as \[demonstrated in_ [_Frank’s Clause_](https://chancerylaneproject.org/climate-clauses/green-investment-obligations/) _(Green Investment Obligations) and_ [_Casper’s Clause_](https://chancerylaneproject.org/climate-clauses/sustainability-linked-loans/) _(Sustainability Linked Loans) and\] outlined in_ [_TCLP’s Net Zero Checklist_](https://docs.google.com/document/d/1j5wX3BIDFCHkNUR-FuvdASXdTvYOlDwMO9M5_JYHloQ/edit?usp=sharing)_._\] --- **_References:_** [_Green Loan Principles_](https://www.lsta.org/content/green-loan-principles/) _(February 2023), published by the LMA, APLMA and LSTA._ ## Topics **Jurisdictions:** [England & Wales](https://chancerylaneproject.org/wp-content/uploads/wp-mfa-exports/taxonomy/jurisdiction/england-wales.md) **Maintenance status:** [Not maintained](https://chancerylaneproject.org/wp-content/uploads/wp-mfa-exports/taxonomy/maintenance-status/not-maintained.md) **Practice Areas:** [Banking and finance](https://chancerylaneproject.org/wp-content/uploads/wp-mfa-exports/taxonomy/practice-area/banking-and-finance.md)