Green Loan vs Sustainability-Linked Loan
Use a Green Loan when the funds go to a defined, eligible green project. Use a Sustainability-Linked Loan when funding is general-purpose and you want pricing tied to enterprise-wide sustainability KPIs.
Both are sustainable-finance instruments, but they work differently: a Green Loan finances a specific green project; an SLL is general-purpose credit whose pricing moves with sustainability performance.
Side by side
| Dimension | Green Loan | Sustainability-Linked Loan (SLL) |
|---|---|---|
| Purpose | Ring-fenced eligible green project | General corporate purposes |
| Framework | Green Loan Principles (GLP) | Sustainability-Linked Loan Principles (SLLP) |
| Pricing | Standard corporate credit pricing (small 'greenium' possible) | Two-way margin ratchet linked to SPTs |
| Reporting | Allocation & impact reporting on the project | Annual verification of KPI performance |
| External review | SPO recommended by GLP | Independent annual verification required |
| Data foundation | Project-level EU Taxonomy assessment | Entity-wide GHG inventory and KPIs |
The financing is directed at a well-defined project (renewables, EV fleet, energy retrofit, green building) that can pass EU Taxonomy technical screening and DNSH.
Financing is general-purpose and the borrower wants pricing to reflect enterprise-wide sustainability performance against ambitious, verified targets.
Frequently asked questions
Can a single facility be both?+
Yes — some banks issue 'green SLLs' that combine use-of-proceeds ring-fencing with a KPI-linked ratchet. Both sets of Principles must be satisfied.
Which is more common?+
SLLs have overtaken Green Loans in most European markets by volume because they suit general corporate financing needs.
Do both need external review?+
SLLs require annual independent verification. Green Loans strongly recommend an SPO at origination but external review is not strictly mandatory.
The CSRD is the EU directive; the ESRS are the technical standards it mandates. One creates the reporting obligation, the other tells you how to report.
Scope 1 and 2 are the emissions a company controls directly or via purchased energy. Scope 3 is everything else in the value chain — typically 70–90% of the total.
A corporate carbon footprint quantifies the total GHG emissions of an organisation over a period. An LCA quantifies the environmental impacts of a specific product across its full life cycle.