--- title: Sustainability-Linked Loans date: 2024-03-27T14:18:07Z modified: 2025-07-23T11:27:34Z permalink: "https://chancerylaneproject.org/clauses/sustainability-linked-loans/" type: clause status: publish excerpt: "" wpid: 2279 jurisdiction: - England & Wales maintenance-status: - Not maintained practice-area: - Banking and finance clause_child_name: "Casper's Clause" clause_summary: "

Model clauses, as a set of optional riders divided into product categories and ESG goals, to incorporate SLPs into traditional financing documents, standard T&Cs and finance products. 

" clause_last_updated_date: 2023-08-10 related_clauses: false --- ## Child’s name Casper’s Clause ## Summary Model clauses, as a set of optional riders divided into product categories and ESG goals, to incorporate SLPs into traditional financing documents, standard T&Cs and finance products. ## What this clause does This clause incorporates the Loan Market Association’s (LMA’s) May 2020 Sustainability Linked Loan Principles into a standard (rather than green) loan agreement. In doing so, this clause mainstreams sustainability into lending, supporting lenders and borrowers to achieve their net zero targets and mobilising finance to support the transition to a decarbonised economy. ## Clause Content \[_Drafting note: Using this clause in LMA form documents: While Casper’s Clause can be used in recommended form documents published by the LMA, it has not been endorsed by, or produced in conjunction with, the LMA. Using and reproducing LMA documents generally are subject to certain restrictions, specifically they may only be used by LMA members for preparing and documenting agreements relating to transactions or potential transactions in the loan markets. Further information is available on the LMA website –_ [_www.lma.eu.com_](http://www.lma.eu.com)_._\] _\[Drafting note: Capitalised terms relate to either a defined term in this clause or a defined term in the main agreement that this clause is designed to be inserted into.\]_ **1.** **Sustainability-Linked Facilities** 1.1 \[Facility/ Tranche\] \[●\] and \[Facility/ Tranche\] \[●\] are each designated as a Sustainability-Linked Facility. 1.2 Sustainability Performance Targets Each Sustainability-Linked Borrower undertakes to use \[its best\]/ \[all reasonable\] endeavours to achieve its SPTs. 1.3 Sustainability Performance Evaluations 1.3.1 Within \[15\] Business Days of receiving a Sustainability Compliance Certificate under Clause 3.1.1 (Sustainability Compliance Certificate), the Sustainability Coordinator shall provide the Sustainability-Linked Borrower with a Sustainability Performance Evaluation detailing the SPTs that are Achieved SPTs for the purposes of calculating a Sustainability-Linked Margin Decrease or Sustainability-Linked Margin Increase under Clause 1.3.2 below. 1.3.2 Each Sustainability Performance Evaluation shall determine whether a Sustainability-Linked Margin Decrease or a Sustainability-Linked Margin Increase shall apply for the Relevant Period, using the following calculations: (a) if the number of Achieved SPTs is over \[75%\] of the total number of SPTs as at the most recent Sustainability Performance Test Date then the Sustainability-Linked Margin Decrease shall apply; or (b) if the number of Achieved SPTs is under \[50%\] of the total number of SPTs as at the most recent Sustainability Performance Test Date then the Sustainability-Linked Margin Increase shall apply. \[_Drafting note: Users of this clause may wish to tailor this drafting to the lenders’ requirements and borrower’s circumstances by weighting the targets that are the most critical. Rather than specifying a percentage of the total SPTs should be achieved, the Sustainability Performance Evaluation could be assessed on a failure to achieve specific SPTs._\] **2.** **Representations** \[_Insert sustainability-linked representations and warranties – for example, correct form of reporting on SPTs etc._\] **3.** **Information Undertakings** 3.1 Sustainability Compliance Certificate 3.1.1 Within 30 days of each Sustainability Performance Test Date, each Sustainability-Linked Borrower shall supply the Sustainability Coordinator with a Sustainability Compliance Certificate setting out (in form and substance satisfactory to the Sustainability Coordinator, acting reasonably) information that complies with this Clause 3.1. 3.1.2 Each Sustainability Compliance Certificate shall: (a) report on the Sustainability-Linked Borrower’s performance against each SPT as at the relevant Sustainability Performance Test Date, and identify the Achieved SPTs; (b) include any relevant report, certification, rating or any other information required by any SPT; (c) detail any assumptions used by the Sustainability-Linked Borrower to prepare the Sustainability Compliance Certificate and evidence of the Sustainability-Linked Borrower’s compliance with each SPT; (d) attach a Verification Report signed by the Sustainability Expert; (e) be reviewed by the Sustainability Committee and signed by a director of the Sustainability-Linked Borrower; and (f) report on any failure by the Sustainability-Linked Borrower to comply with its Sustainability Objectives. 3.2 Sustainability Strategy Each Sustainability-Linked Borrower shall: (a) at all times and in all material respects procure that the Group’s business is carried out in accordance with the Sustainability Strategy; and (b) only amend or vary the Sustainability Strategy with the prior written consent of the Sustainability Coordinator (acting in accordance with the instructions of the Majority Lenders such consent not to be unreasonably withheld or delayed). **4.** **\[Events of Default\]/ \[Sustainability-Linked Margin Increase\]/ \[Declassification\]** \[_Drafting note: The parties may not wish for a breach of the sustainability provisions to be an Event of Default, as it may disincentivise the Sustainability-Linked Borrower from agreeing to more ambitious SPTs. Instead, the parties may agree that (i) a margin increase shall apply or (ii) if the Borrower fails to comply with these provisions, the loan will be "declassified" and can no longer be classified as a sustainability-linked loan. The economic benefits of the sustainability link (i.e. the reduction in margin) will no longer be available to the Borrower and the Borrower will not be able to publicise the loan as sustainability-linked. The parties may wish to include additional events here, i.e. a change in the status or business of the Borrower._\] \[An Event of Default\]/ \[A Sustainability-Linked Margin Increase\]/ A Declassification Event\] shall occur if: 4.1 The Sustainability-Linked Borrower: 4.1.1 fails to provide a Sustainability Compliance Certificate for a Sustainability Performance Evaluation within 30 days of each Sustainability Performance Test Date under clause 3.1.1; and 4.1.2 does not remedy the failure in clause 4.1.1 within \[15\] Business Days. For the avoidance of doubt, the \[15\] Business Days start from the end of the 30 days in clause 3.1.1; or 4.2 \[a Sustainability-Linked Borrower fails to remedy a \[material\] breach reported under Clause 3.1.2(e) within \[60\] days of a written request by the Sustainability Coordinator (acting on the instructions of the Majority Lenders).\] **5.** **Rendezvous** \[5.1 If a Sustainability-Linked Borrower or the Sustainability Coordinator (acting on the instructions of the Majority Lenders) determines that the SPTs cannot be calculated or are no longer fit for purpose, a Sustainability-Linked Borrower and the Sustainability Coordinator (acting on the instructions of the Majority Lenders) shall negotiate in good faith for a period of not more than \[60\] days to agree revised SPTs. 5.2 If revised SPTs cannot be agreed by a Sustainability-Linked Borrower and the Sustainability Coordinator (acting on the instructions of the Majority Lenders) in accordance with Clause 6.1, a Declassification Event shall occur.\] \[_Drafting note: The parties may wish to include mechanics such that if the SPTs are not met, the parties can agree to (i) enter into negotiations to revisit the SPTs, or (ii) declassify the loan as a sustainability-linked loan._\] **6.** **Conditions Subsequent** 6.1 \[Each Sustainability-Linked Borrower shall publish its Sustainability Strategy and \[its/ the corresponding\] SPTs on the relevant Sustainability-Linked Borrower’s website within \[●\] Business Days of the date of this Agreement.\] 6.2 \[Each Sustainability-Linked Borrower’s Net Zero Target shall be verified by the [Science Based Targets initiative](https://sciencebasedtargets.org/) within \[one year\] of the date of this Agreement.\] 6.3 \[Each Sustainability-Linked Borrower shall sign up to [Race to Zero](https://racetozero.unfccc.int/system/race-to-zero/?_gl=1*y79oti*_ga*MjA2NDczMzIzMC4xNjk5MzY5NDIz*_ga_7ZZWT14N79*MTcwOTU2NzQxMy45LjEuMTcwOTU3MTExOC4wLjAuMA) within \[six months\] of the date of this Agreement.\] **Schedule \[1\] – Conditions Precedent (CPs)** 1\. Sustainability-linked documentation. 1.1 The Sustainability Strategy. 1.2 A certificate of the Sustainability-Linked Borrower (signed by at least 1 (one) director) confirming that the Sustainability-Linked Borrower will undertake its business activities and apply proceeds of the Sustainability-Linked Facilities in accordance with the Sustainability Strategy. 1.3 \[_Insert specific SPTs CPs/ Industry standard reports/ ratings related to SPTs etc._\] **Schedule \[2\] – Sustainability Performance Targets** \[_Drafting note: The SPTs listed below are additional to the SPTs listed in_ [_Appendix 1 of the Sustainability Linked Loan Principles_](https://www.lma.eu.com/application/files/5115/8866/8901/Sustainability_Linked_Loan_Principles_V032.pdf)_. Users of Casper’s Clause will need to add to this schedule such of the SPTs listed in Appendix 1 that meet their requirements._\] | **SPT** | **Category** | **SPT Targets** | | --- | --- | --- | | **SPT1** | GHG Emission reduction | - \[Quarterly progress toward reaching a \[•%\] reduction in the Carbon Footprint against the previous year’s Carbon Footprint and meeting all interim targets towards achieving the Net Zero Target by the corresponding dates specified in the Sustainability Strategy.\] | | **SPT2** | Employee Training Programme | - \[Training staff on sustainability/ climate issues and how to improve on the Sustainability-Linked Borrower’s Carbon Footprint.\]\* | | **SPT3** | Offsetting | - \[Targets from the Offsetting Strategy to gradually transition the underlying offsetting projects to purely Offsets that remove emissions, rather than avoid or reduce others’ emissions.\] | | **SPT4** | \[●\] | - \[_Insert additional categories and SPTs listed in_ [_Appendix 1 of the Sustainability Linked Loan Principles_](https://www.lma.eu.com/application/files/5115/8866/8901/Sustainability_Linked_Loan_Principles_V032.pdf)_._\] | \* \[_Drafting note: Consider including a specific number of hours training or other more specific requirements._\] **Schedule \[3\] – Form of Sustainability Compliance Certificate** To: \[●\] as Sustainability Coordinator From: \[Sustainability-Linked Borrower\] Dated: To whom it may concern, **\[Sustainability-Linked Borrower\] – Facility Agreement dated \[●\] (the “Agreement”)** 1\. We refer to the Agreement. This is a Sustainability Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Sustainability Compliance Certificate unless given a different meaning in this Sustainability Compliance Certificate. 2\. Sustainability-Linked Borrower’s report on its Sustainability Performance Targets as at the most recent Sustainability Performance Test Date. | **SPT** | **SPT Category** | **Developments during period since the immediately preceding Sustainability Performance Test Date** | **Self-evaluation of Sustainability-Linked Borrower** | | --- | --- | --- | --- | | **SPT1** | GHG Emission reduction | \[●\] | \[Achieved SPT\] \[Unachieved SPT\] | | **SPT2** | Employee Training Programme | \[●\] | \[Achieved SPT\] \[Unachieved SPT\] | | **SPT3** | Offsetting | \[●\] | \[Achieved SPT\] \[Unachieved SPT\] | | **SPT4** | \[_Insert additional categories listed in_ [_Appendix 1 of the Sustainability Linked Loan Principles._](https://www.lma.eu.com/application/files/5115/8866/8901/Sustainability_Linked_Loan_Principles_V032.pdf)\] | \[●\] | \[Achieved SPT\] \[Unachieved SPT\] | 3\. The Verification Report signed by the Sustainability Expert is attached. | Signed: | ………… | ………… | | --- | --- | --- | | Director | Director | | | of | of | | | \[_Sustainability-Linked Borrower_\] | \[_Sustainability-Linked Borrower_\] | | **Schedule \[4\] – Form of Sustainability Performance Evaluation** To: \[●\] as Sustainability-Linked Borrower From: \[●\] as Sustainability Coordinator Dated: To whom it may concern, \[Sustainability-Linked Borrower\] – Facility Agreement dated \[●\] (the **Agreement**) 1\. We refer to the Agreement. This is a Sustainability Performance Evaluation. Terms defined in the Agreement have the same meaning when used in this Sustainability Performance Evaluation unless given a different meaning in this Sustainability Performance Evaluation. 2\. We have evaluated your Sustainability Compliance Certificate dated \[Date\]. \[It is our assessment that \[SPT\]\[, SPT\]\[ and SPT\] are Achieved SPTs.\] \[It is our assessment that no SPTs are Achieved SPTs.\] \[3. Sustainability-Linked Borrower\] has achieved \[●\]% of its SPTs. 4\. As \[Sustainability-Linked Borrower\] has achieved \[\[75%\] or more\]\[\[50%\] or less\]\[between \[50%\] and \[75%\]\] of its SPTs, \[Sustainability-Linked Borrower\] \[will have a Sustainability-Linked Margin \[Increase\]\[Decrease\]\]\[no Sustainability-Linked Margin Increase or Sustainability-Linked Margin Decrease\] shall be applied. 5\. Margin from the date of this certificate until delivery of the next succeeding certificate (“Temporary Margin Interest Period”) shall be \[●\]% per annum. | Signed: | …………………………………………. | | --- | --- | | Authorised Signatory | | | of | | | \[_Sustainability Coordinator_\] | | ## Topics **Jurisdictions:** [England & Wales](https://chancerylaneproject.org/news/jurisdiction/england-wales/) **Maintenance status:** [Not maintained](https://chancerylaneproject.org/news/maintenance-status/not-maintained/) **Practice Areas:** [Banking and finance](https://chancerylaneproject.org/news/practice-area/banking-and-finance/)