Apply the Loan Market Association's sustainability-linked loan principles to a facility structure.
Finance & Banking
Structuring Sustainability-Linked Loans and Calibrating Performance Targets
Learn to structure sustainability-linked loans against the LMA principles, select and calibrate KPIs, and defend targets against greenwashing scrutiny.
🗓️Duration5 training days
📚Content4 modules · 8 sessions
🎓On completionAccredited attendance certificate
About the programme
Course Overview
A sustainability-linked loan is only as credible as the target sitting inside it, and lenders who set a target the borrower would have hit anyway are now being called out publicly for it. This course focuses on the part of the transaction that decides whether a facility is genuinely sustainability-linked or merely relabelled: selecting a small number of material key performance indicators and calibrating sustainability performance targets that represent a real stretch against the borrower's trajectory. Participants work through the Loan Market Association's sustainability-linked loan principles, structure the margin ratchet that ties pricing to target achievement, and decide when a second party opinion or external verification is warranted. The course covers KPI selection across sectors - emissions intensity, water use, diversity, waste diversion - and calibration methods that separate an ambitious target from a business-as-usual baseline dressed up as progress. Delegates practise structuring a facility from term sheet to closing, including baseline documentation, verification cadence and consequences of target failure, and learn to spot structuring choices that attract greenwashing criticism from investors and regulators.
Expected Learning Outcomes
Select material key performance indicators appropriate to the borrower's sector and business model.
Calibrate sustainability performance targets against a documented baseline and trajectory rather than business as usual.
Structure a margin ratchet mechanism that credibly links pricing to target achievement.
Decide when a second party opinion or external verification is required and how to commission one.
Identify structuring choices, including weak targets and undisclosed baselines, that attract greenwashing criticism.
Document monitoring, verification and consequence mechanisms through to facility maturity.
Who Should Attend
Corporate and leveraged finance bankers structuring sustainability-linked facilities
Sustainable finance and ESG specialists supporting loan origination teams
Credit risk officers assessing sustainability-linked loan proposals
Legal and documentation teams drafting sustainability-linked loan terms
Corporate treasurers and finance teams negotiating sustainability-linked facilities
Investors and analysts assessing the credibility of disclosed sustainability-linked loans
Course Modules
Select any module to see its sessions and points.
01Principles and Structuring Foundations
2 sessions · 8 points
Session 1The LMA Sustainability-Linked Loan Principles
- Apply the five core components of the sustainability-linked loan principles from KPI selection through reporting.
- Distinguish sustainability-linked loans from green and use-of-proceeds loans and identify when each structure fits.
- Assess borrower eligibility and sustainability strategy alignment before agreeing to a sustainability-linked structure.
- Set the governance process for approving KPIs, targets and verification within the lending institution.
Session 2Term Sheet Structuring and Key Terms
- Draft term sheet language covering KPIs, sustainability performance targets, testing dates and margin adjustment.
- Negotiate the size and symmetry of the margin ratchet between improvement and deterioration in performance.
- Structure amendment and waiver mechanics for cases where a KPI becomes unmeasurable or irrelevant.
- Coordinate sustainability-linked terms with existing financial covenants to avoid conflicting incentives.
02Selecting and Calibrating KPIs and Targets
2 sessions · 8 points
Session 1KPI Selection Across Sectors
- Select emissions intensity, energy or water KPIs appropriate to carbon-intensive and resource-intensive sectors.
- Select workforce, diversity or supply chain KPIs where they represent material sustainability issues for the borrower.
- Limit the KPI set to a small number of material, measurable indicators rather than a broad symbolic list.
- Verify that selected KPIs are measurable using data the borrower already collects or can reliably obtain.
Session 2Calibrating an Ambitious Target
- Establish a documented, verifiable baseline from historical borrower data before setting the target trajectory.
- Calibrate targets against science-based pathways or sector benchmarks rather than the borrower's own business plan alone.
- Test whether a proposed target would have been met without any incremental action by the borrower.
- Set annual or interim milestones that allow performance to be tracked before the final target date.
03Verification, Pricing and Documentation
2 sessions · 8 points
Session 1Verification and Second Party Opinions
- Decide when an external second party opinion is warranted on KPI selection and target calibration.
- Commission independent verification of reported performance against agreed KPIs at each testing date.
- Assess the independence and competence of a proposed verifier before accepting its findings.
- Document the verification cadence and evidence standard within the facility agreement.
Session 2Pricing Mechanics and Consequence Design
- Design a margin ratchet that produces a meaningful financial consequence for missing the target, not a token adjustment.
- Decide how any margin saving from an incentive mechanism is used, including donation or reinvestment clauses.
- Structure consequences for repeated target failure, including reporting requirements or facility review triggers.
- Model the pricing impact of the ratchet under different performance scenarios before closing.
04Monitoring and Defending Against Greenwashing Scrutiny
2 sessions · 8 points
Session 1Ongoing Monitoring and Reporting
- Set an annual reporting cycle that discloses KPI performance, verification outcomes and any target amendments.
- Monitor for events, such as acquisitions or divestments, that materially change the relevance of an existing KPI.
- Maintain a file linking each testing date to the underlying data, verification report and pricing adjustment applied.
- Escalate persistent underperformance or data quality issues to credit and sustainability governance committees.
Session 2Anticipating External Scrutiny
- Identify the structuring choices, including immaterial KPIs and undisclosed baselines, that most often draw criticism.
- Prepare disclosure language that explains target calibration rationale in terms a non-specialist reader can assess.
- Benchmark a proposed facility against publicly criticised transactions to avoid repeating known weaknesses.
- Advise borrowers on maintaining consistency between sustainability-linked loan disclosures and other public ESG claims.
What the participant receives
4 course modules
A structured syllabus
8 training sessions
across 5 days
32 detailed points
Applied, detailed content
Accredited attendance certificate
On completing the programme
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