- 16 Nov 2023
- •
- 2 min read
Sustainable Finance is an overarching term, typically covering the provision of Green Loans, Social Loans, and Sustainability-linked Loans from lenders to borrowers.
Loans of these kind allow businesses looking to inject cash into sustainable business practices, to access lender facilities with favourable terms (i.e. lower rates of interest).
What are the differences between Green Loans, Social Loans, and Sustainability-Linked Loans?
The three common forms of sustainable finance are as follows: Green Loans, Social Loans, and Sustainability-linked Loans.
Green Loans and Social Loans are proceeds focused, in that they will be given to the borrower to fund a specific activity / piece of work. Sustainability-linked loans are more general in their application.
- Green loans: Used to fund projects towards an environmental objective
- Social loans: Used to fund projects that seek to address social issues or achieve positive outcomes
- Sustainability-linked loans: Used to generally fund an organisation that has broader environmental / social objectives (i.e. the sustainable profile of a company)
Benefits (for borrowers)
- Access to a broader pool of capital
- Often have favourable interest rates
- Can be tailored to a specific asset / product / objective
- Flexible in their creation
Benefits (general)
- Greater liquidity on climate conscious projects (i.e. trickle-down benefits)
- Steering businesses to operate more sustainably
- Alignment of lending and environmental objectives
How can we help?
The scope for Sustainable Finance is broad and decided on a case-by-case basis.
- We can assist in determining whether a project / objective meets the principles for qualification as a green, social, or sustainability-linked loan.
- We can assist in the production of documentation to capture the benefits that sustainable finance forms provide.
- We can help guide you in monitoring and reporting progress in a project / towards an objective (often in line with terms agreed with the lender).
If you wish to hear more about Sustainable Finance options, and whether you may be able to access them, please contact the firm on 023 8032 1000 and ask to speak to one of our banking and finance specialists.
