The Green Loan Principles (GLP) are the voluntary framework published by the LMA, APLMA and LSTA that defines what qualifies as a Green Loan. First issued in 2018 and updated regularly, they are the market standard referenced by every major bank in green loan documentation.
The four core components
1. Use of proceeds. Proceeds must be applied exclusively to eligible Green Projects, described in the loan documentation. Refinancing of existing eligible projects is permitted with disclosure.
2. Process for project evaluation and selection. The borrower must communicate:
- Environmental sustainability objectives.
- Process for determining project eligibility.
- Related eligibility criteria.
- Any exclusion criteria and process to identify and manage environmental and social risks.
3. Management of proceeds. Proceeds must be credited to a dedicated account or otherwise tracked in a manner that maintains transparency. Where unallocated, temporary use must be disclosed.
4. Reporting. Annual reporting of allocation and, where feasible, expected or actual impact — typically CO₂e reductions, MWh renewable capacity installed, m² of green building certified, etc.
Eligible Green Project categories
The GLP recognise ten indicative categories:
- Renewable energy
- Energy efficiency
- Pollution prevention and control
- Environmentally sustainable management of living natural resources and land use
- Terrestrial and aquatic biodiversity conservation
- Clean transportation
- Sustainable water and wastewater management
- Climate change adaptation
- Circular economy adapted products, production technologies and processes
- Green buildings
Alignment with the EU Taxonomy technical screening criteria is increasingly used as the eligibility standard, especially in Europe.
Second Party Opinion
Not mandatory, but effectively standard practice. An SPO — issued by an independent reviewer — confirms alignment with the GLP and, where relevant, EU Taxonomy alignment.
When a Green Loan is the right structure
Green Loans suit discrete, identifiable green CapEx:
- Solar / wind projects
- Green buildings and refurbishments
- EV fleet
- Energy-efficiency retrofits
- Water infrastructure
For general corporate purposes tied to enterprise-wide sustainability KPIs, an SLL is the better fit — see our comparison guide.
Common pitfalls
- Labelling issues. Facilities not meeting the four components can't credibly carry a "green" label.
- Weak impact reporting. Impact metrics that are unmeasurable or not tied to eligible projects undermine the framework.
- Taxonomy misalignment. In the EU, market expects at least an assessment against Taxonomy technical screening criteria and DNSH.
How Redigo Carbon supports green loan origination
Redigo Carbon provides the technology backbone for green loan origination and reporting — from EU Taxonomy alignment assessment to annual allocation and impact reporting, orchestrated with independent reviewers.
Frequently asked questions
Do Green Loans get better pricing?+
Sometimes a modest 'greenium' of 1–5 bps, but pricing depends more on the borrower's credit profile than on the green label. The bigger benefit is access to deeper pools of capital.
Can working capital be a Green Loan?+
Only if the working capital is genuinely dedicated to eligible green projects (e.g. renewable energy project development). Otherwise, an SLL is the appropriate structure.
How does the GLP relate to the EU Green Bond Standard?+
The EU GBS (in force 2024) is a stricter, regulated framework for green bonds requiring full EU Taxonomy alignment. The GLP for loans remain voluntary and more flexible; EU Taxonomy alignment is best practice but not a legal requirement.
This article follows Redigo Carbon's editorial standards: factual claims reference recognised frameworks — GHG Protocol, CSRD, ESRS, the Sustainability-Linked Loan Principles, the Green Loan Principles — and Redigo's opinions are labelled as such.
What this article is based on.
- Green Loan Principles (LMA / APLMA / LSTA) — LMA / APLMA / LSTA
- IPMVP — International Performance Measurement and Verification Protocol — EVO
- Sustainability-Linked Loan Principles (LMA / APLMA / LSTA) — LMA / APLMA / LSTA
- PCAF — Global GHG Accounting and Reporting Standard for the Financial Industry — PCAF
- TCFD — Recommendations of the Task Force on Climate-related Financial Disclosures — TCFD / FSB
Redigo Carbon distinguishes between regulatory requirements, industry standards, best practice and Redigo's own recommendations. See our editorial standards for how we research, cite and update this content.
Sustainable Finance for banks — from fundamentals to scale
See the full pathYou are on step 1 of 7 in this journey.