April 13, 2021 - The LSTA, LMA and APLMA today announced the publication of the Social Loan Principles (SLP). The SLP aim to create a high-level framework of market standards and guidelines, providing a consistent methodology for use across the social loan market, whilst allowing the loan product to retain its flexibility and preserving the integrity of the social loan market while it develops.
The SLP build on and refer to the Social Bond Principles (SBP) administered by the International Capital Markets Association (ICMA), with a view to promoting consistency across financial markets.
They have been developed by an experienced working party consisting of representatives from leading financial institutions and law firms active in the global loan markets, with a view to promoting the development and integrity of the innovative social loan product.
The SLP comprise voluntary recommended guidelines, to be applied by market participants on a deal-by-deal basis depending on the underlying characteristics of the transaction, based around the following four core components:-
- Use of Proceeds
- Process for Project Evaluation and Selection
- Management of Proceeds
Following the launch of the Green Loan Principles in 2018 and the Sustainability Linked Loan Principles in 2019, the SLP represent another key milestone in the development of the global market for sustainable lending products.
The LSTA, LMA and APLMA intend to produce a separate guidance document on the SLP in due course.
Commenting on the SLP, Hannah Vanstone, Legal Associate of the LMA, said:
“The speed with which environmental, social and governance (ESG) issues have moved into mainstream finance is truly remarkable. At the LMA, we have already seen the power of green loans and sustainability linked loans to drive positive ESG outcomes. Since the commencement of the covid-19 pandemic, we have seen a huge increase in the issuance of social loans, which seek to channel capital directly towards positive social outcomes. The LMA is delighted to have worked alongside the APLMA and LSTA to produce the Social Loan Principles which are intended to serve as a global framework for use across the social loan market. We hope these Principles will help further increase the flow of capital into vitally important social projects worldwide.”
Rosamund Barker, Head of Legal at the APLMA, commented:
“The Social Loan Principles aim to provide an internationally recognised framework with which to help banks bridge the funding gap to end extreme poverty and boost shared prosperity in furtherance of the SDGs by 2030. We believe that aligning the SLPs with the Social Bond Principles promotes coherence and integration in both products, and enables on-lending and refinancing in either format. The APLMA is very pleased once again to have joined forces with the LMA and LSTA in this project to promote global reach of social lending.”
Tess Virmani, Associate General Counsel & EVP, Public Policy of the LSTA, said:
“The publication of the inaugural Social Loan Principles (SLPs), the third instalment in our growing library of sustainable finance frameworks, is a testament to the dynamism of this space and the swiftness in which the global loan markets are responding to client needs. The LSTA is delighted to be working with the LMA and APLMA to offer guidance and support to market participants on a global basis and look forward to seeing further growth of social loans.”