Alerts Archive
LMA Publishes Updated Draft Provisions for Sustainability-Linked Loans, Term Sheet, and New Accompanying Educational Note
18 August 2026Part A of the updated Provisions retains the core architecture of the previous drafting, while incorporating amendments intended to promote greater consistency and clarity in sustainability-linked loan (SLL) drafting and to reflect developments in market practice. The updated Provisions continue to be non-binding and are intended to provide a starting point for negotiation.
The revisions focus on areas where additional clarity or simplification was considered helpful, including provisions relating to declassification events, sustainability amendments, sustainability compliance certificates, sustainability reporting, verification reports and sustainability margin adjustments. The updated drafting also reflects that certain provisions may need to be tailored depending on the relevant transaction, including the number and nature of KPIs, the applicable SLL reference period, the operation of the margin adjustment, and the role of any sustainability coordinator.
A new Part B has also been added to address “sleeping” SLL structures. This new section provides two alternative approaches: a short form amendment mechanism, where the SLL provisions are agreed post-origination alongside the KPIs and SPTs, and a full form approach, where SLL provisions are included at origination and become effective post-origination once the relevant KPIs, SPTs and other outstanding amendments are agreed.
In addition, the LMA has published a new Educational Note, Provisions for Sustainability-Linked Loans: Promoting sustainability goals and preserving integrity. The Educational Note explains the purpose of the contractual “guardrails” reflected in the Provisions, including sustainability breach provisions, sustainability amendment mechanisms and declassification provisions. These features are intended to support the integrity of SLLs and should be considered together as part of the overall contractual framework.