The Loan Syndications and Trading Association (LSTA) has this week published drafting guidance for sustainability-linked loans (SLLs) for US-style credit agreements, something which the Loan Market Association (LMA) has yet to do for English-style loan agreements.
The guidance, which can be found here, aims to serve as a useful drafting resource and to encourage the take-up of these ESG products in the US market. The LSTA notes the difficulties present in standardising provisions which are constantly evolving (given the growth of SLLs in the past couple of years), but hopes to reflect the current drafting practice in the market.
The guidance includes helpful context on the inclusion and modification of certain provisions, along with an annex with commentary and drafting guidance on “sleeping SLLs”. These are SLLs that “switch” on the SLL label after signing once full diligence of the proposed KPIs and SPTs is completed and provided that the loan adheres to the SLLP and related guidance at the time it is activated.
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