Outside Publication

ESG in the Credit Agreement: A Closer Look at Sustainability-Linked Loan Mechanics, Reuters

June 10, 2022

In a Reuters article, partners Andrew Budreika and Liz Goldberg and associate Ben Stango examine some key credit agreement provisions governing one of the hottest banking products in environmental, social, and governance (ESG)—sustainability-linked loans (SLLs). These loans tie meaningful key-performance indicators of an environmental, social, or governance variety, then set sustainability performance targets (SPTs) tied to those indicators. If the borrower achieves or exceeds its SPTs, it is typically rewarded with lower interest and fees. If the borrower falls short of the SPTs or some minimum threshold, it can be penalized with higher interest and fees.

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