Press Release

Following a co-ordinated outreach exercise on behalf of their members, the European Leveraged Finance Association (ELFA) and Loan Market Association (LMA) have published a Best Practice Guide for Term Sheet Completeness to support greater ESG transparency and combat greenwashing in the syndicated loan market.

The LMA and ELFA published initial term sheet guidance in November 2020, following a survey of investors, and the organisations have again joined forces with the investor community and with specialist review providers (Covenant Review, Reorg, and 9fin) to update the checklist to include ESG provisions. The updates follow a further investor survey in Q3 2021 alongside additional working group consultations to determine the material ESG terms to be included at term sheet stage. The ELFA and LMA’s checklist has been updated to reflect that input and to encourage more information flow on ESG provisions.

A key takeaway from working group discussions was that ESG is an area of growing importance, with investors expressing a need for ESG terms to be properly identified and analysed at the term sheet stage. Improvements in this area are viewed as crucial to avoid the risks of greenwashing in the loan market.

Key updates include a detailed set of information on the margin ratchet when linked to the borrower’s sustainability performance, recommendations to include information on ESG reporting, and further completeness on KPIs and sustainability performance targets (SPTs).

A full list of the updates and complete checklist is available to view in the guidance, which can be downloaded here.