# Sustainability Linked Loans Checker

> Source: https://bryter.com/de/use-cases/sustainability-linked-loans-checker/

The Sustainability Linked Loans Checker is designed to help Corporations, Banks and Financial Institutions assess the eligibility of any type of loan financing – including term loans, revolving credit facilities, or any other type of facility – to qualify as Sustainability Linked Loans and enabling the company’s assets to be tied to predetermined ESG metrics.

#### Background

Before 2016, the approach to addressing climate change risks and the need for businesses to act responsibly was primarily based on voluntary initiative. But over the last five years, this approach has been gradually overtaken by regulations. One example of this was the [Loan Market Association](https://www.lma.eu.com/) (“LMA”), [Asia Pacific Loan Market Association](https://www.aplma.com/) (“APLMA”) and the [Loan Syndications and Trading Association](https://www.lsta.org/) (“LSTA”) who launched their [Green Loan Principles](https://www.lsta.org/content/green-loan-principles/) with the support of the International Capital Market Association (“ICMA”) in March 2018. A year later, in March 2019, the [Sustainability Linked Loan Principles](https://www.lsta.org/content/sustainability-linked-loan-principles-sllp/) were published, as a landmark move to help align loan facilities with sustainability potential. 
 

The defining feature of Sustainability Linked Loans is that the terms of the loan incentivize the borrower to improve its performance against certain pre-determined ESG criteria. As a result, the pricing on the loan is linked to the sustainability performance of the borrower. In this context, the role of investors is a fundamental driver for companies to be compliant with ESG criteria since many of them are now requiring asset managers to fully integrate ESG into their investment processes, also in light of the new issues that emerged with the COVID-19 outbreak. 

#### Sustainability Linked Loans Principles

Under the Sustainability Linked Loans Framework, there are five core principles against which lenders can assess the sustainability rating of a loan facility: selection of KPIs, calibration of SPTs, loan characteristics, reporting and verification. The goal of these principles is to ensure that loan facilities are used towards sustainable objectives and closely aligned to the strategic sustainability policies and targets. 

#### Lenders’ Perspective: Sustainability Checking

But while the principles work towards more sustainable economic growth, they do put an additional strain on lenders, who now need to invest additional efforts in assessing loan facility requests for sustainability.  

As a rule of thumb, lenders need to inspect projects’ sustainability verification made by environmental consultants, or independent auditors with relevant expertise, and they also need to continuously check the project against sustainability benchmarks, monitor the borrower’s performance and ensure consistent reporting, which is only exacerbated by different types of sustainability goals envisaged by the SLLP.  

With BRYTER, corporations and financial institutions can easily assess the sustainability score of any kind of loan facility against regulatory requirements and industry standards.  

Our interactive tool guides the user through a transaction-specific questionnaire and automatically calculates a sustainability score based on each type of debt facility. As a result, the user receives a 360° assessment of their sustainability risks and opportunities, along with practical next steps to mitigate the different risks, including the loan being labelled as “greenwashing”, and to set the “sustainability performance targets” (“SPTs”) for the borrower. 

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