'Green$' for Green: Structuring and documenting sustainable finance deals – American Bar Association

Lisa Mantello

Sep 17, 2022

Sustainability-linked loans (SLLs) are becoming increasingly popular in the Canadian market, with favourable pricing making these loans more attractive to Canadian investors, Osler’s Lisa Mantello, partner, Financial Services, reports during a panel discussion at the recent American Bar Association’s annual meeting.

Lisa says that some Canadian SLLS may have multiple key performance indicators (KPIs) that address different environmental, social and governance targets. KPIs include greenhouse gas intensity, percentage of green buildings, and percentage of women and minorities in the workplace.

With credit agreements, reporting inaccuracy is an event of default consistent with standard representations and warranties. If the parties become aware of a material inaccuracy, then the borrower either will be obligated to pay the excess interest and fees if the calculation would have resulted in an increase in the applicable margin. Alternatively the excess interest and fees actually paid would be credited if the calculation would have resulted in a decrease in the applicable margin.

There may be provisions in the credit agreement for the parties to negotiate changes to the sustainability performance targets after the acquisition or disposition of a subsidiary.