Sustainable finance
Green Loan
Definition
A green loan is any form of loan instrument or contingent facility whose proceeds, or an equivalent amount, are applied solely to fund, refinance, or guarantee, in whole or in part, new or existing eligible green projects. The Green Loan Principles, published jointly by the LMA, APLMA, and LSTA, define four core components: use of proceeds, process for project evaluation and selection, management of proceeds, and reporting.
References
history and components
definition and framework
Overview
What it means
Green loans are the loan-market counterpart of green bonds: the use-of-proceeds restriction is the defining feature, distinguishing them from sustainability-linked loans, where proceeds are unrestricted but the margin varies with sustainability performance. The LMA's 2024 draft provisions for green loans are standardising how the principles enter facility documentation.
How it is used
Corporates and banks structure green term loans and revolving facilities for eligible categories such as renewable energy, energy efficiency, pollution prevention, sustainable water, and clean transport, with tracking and reporting to lenders.
Why it matters
They extend labelled green finance beyond capital markets into the far larger bank-lending channel. **Note:** 1277 Green loan verification merges into this entry; external review practice is covered here and in the green bond external review entry (1257).