Sustainability-Linked Loans
Performance-based lending tied to sustainability KPIs.
Sustainability-Linked Loans (SLLs) are general-purpose credit facilities whose pricing moves with the borrower's performance against material, ambitious sustainability targets. Governed by the LMA / APLMA / LSTA Sustainability-Linked Loan Principles, they are today the dominant sustainable-finance instrument for corporates and, increasingly, SMEs.
Any loan that ties financial terms to the borrower's performance against ambitious, material and externally verified sustainability targets, in line with the Sustainability-Linked Loan Principles (SLLP) published by the LMA, APLMA and LSTA.
Key concepts
The metric on which performance is measured — typically absolute Scope 1+2 tCO₂e, energy intensity, or a sector-specific indicator.
Sustainability Performance Target — the calibrated, benchmarked trajectory the borrower commits to, verified externally each year.
The two-way pricing adjustment applied when SPTs are met or missed. Under the SLLP, both directions are expected.
A Second Party Opinion at origination and annual verification post-drawdown, delivered by an independent reviewer.
Featured articles
What is a Sustainability-Linked Loan? A complete guide for borrowers and banks
A pillar guide to Sustainability-Linked Loans (SLLs): how the structure works, what the SLLP require, KPI and SPT selection, pricing mechanics, and how to run a credible SLL programme.
Sustainability-Linked Loan vs Green Loan: which one do you need?
SLLs and Green Loans are both core sustainable lending products but solve different problems. A side-by-side comparison covering use of proceeds, KPIs, pricing, reporting and when each fits.
Glossary terms
Frequently asked questions
What is the difference between an SLL and a Green Loan?+
A Green Loan finances a specific eligible green project (use-of-proceeds). An SLL is general-purpose credit whose pricing is linked to sustainability performance, regardless of what the money is used for.
Who verifies the SPTs?+
Under the SLLP, borrowers must obtain independent verification of KPI performance at least once a year. Redigo Carbon partners with Audelya, whose network of independent reviewers provides the Second Party Opinion and annual verification.
Do SPTs need to be ambitious?+
Yes. The SLLP require targets to be material to the borrower's business and ambitious beyond a business-as-usual trajectory, typically benchmarked against a science-based pathway or a recognised sectoral reference.
Related regulations
- SLLPSustainability-Linked Loan Principles
Voluntary framework published by LMA, APLMA and LSTA defining the five components of an SLL.
View source - EBAEBA guidelines on ESG risks
Prudential expectations for how banks identify, measure and manage sustainability-linked exposures.
Industry-specific guidance
Process heat, purchased electricity and upstream materials dominate manufacturers' footprints — and the sustainable-finance opportunity is proportionally large.
Transport and logistics operators sit at the intersection of Scope 1 fuel use and their customers' Scope 3 category 4 emissions — making them a priority for both green loans and SLLs.
For food & beverage, upstream agriculture and land use dominate the footprint — putting the sector at the sharp end of SBTi FLAG guidance and the EU Deforestation Regulation.
For banks and investors, sustainability is a system-level challenge — measured, priced and disclosed across the entire balance sheet.
Related platform capabilities
Comparisons
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.
Carbon reporting is one piece of sustainability reporting. Sustainability reporting covers the full spectrum of environmental, social and governance topics.
Recommended next reading
- 01What is a Sustainability-Linked Loan? A complete guide for borrowers and banks
A pillar guide to Sustainability-Linked Loans (SLLs): how the structure works, what the SLLP require, KPI and SPT selection, pricing mechanics, and how to run a credible SLL programme.
- 02Sustainability-Linked Loan vs Green Loan: which one do you need?
SLLs and Green Loans are both core sustainable lending products but solve different problems. A side-by-side comparison covering use of proceeds, KPIs, pricing, reporting and when each fits.
See how the Redigo Carbon platform turns sustainability-linked loans into an operating system.
- Sustainability-Linked Loan Principles (LMA) — LMA / LSTA / APLMA
- LSTA SLLP guidance — LMA / LSTA / APLMA
This page follows Redigo Carbon's editorial standards: factual claims reference recognised frameworks; Redigo opinions are labelled as such.