July 2, 2018 - On June 27th, King & Spalding and LSTA hosted an evening seminar on Green Loan, Sustainable Finance & Impact Investing at King & Spalding’s New York office. Cecilia Hong of King & Spalding moderated the panel discussion which included Marilyn Ceci of JPMorgan, Lucie Campos Caresmel of Credit Agricole, Rekha Unnithan of Nuveen and Tess Virmani of LSTA. The discussion examined the development of impact investing in private equity and real estate where investments are made with a view to make a positive social and environmental impact but with returns that are commensurate with traditional investing. This growing area may be separate from sustainable finance which is a broader term that includes popular public products such as green bonds, social bonds and sustainable bonds as well as other newer private assets such as green or sustainable loans. The Green Bond Principles maintained by ICMA are a voluntary framework that provides transparency and integrity for bonds where the proceeds are used exclusively for green projects. The GBP have been successful in helping spur the tremendous growth in the global green bond market. Social Bonds following the Social Bond Principles require the proceeds of those bonds to be used for social projects while the newer Sustainability Bond Guidelines described Sustainability Bonds where the proceeds will be exclusively applied to both Green and Social Projects. The demand driving the growth of these products has also moved to the loan market. Moving on to other asset classes, Europe, and the rest of the world to a lesser degree, has seen the emergence of a sustainable lending market. The panelists stressed the importance of terminology and clarity with respect to sustainable products. For instance, part of green lending activity has been in the form of Green Loans as described in the APLMA/LMA Green Loan Principles that were published in March 2018. These loans are often term loans, but may be revolvers, but in either case are use of proceeds loans for Green Projects. Similar to the GBP, these green loans are effectively project financings. But there have been other innovations. Metrics-based loans that are not used to finance Green Projects, but rather are general corporate purpose revolvers tied to the borrower achieving certain measurable green or sustainable milestones are also becoming more popular. (For a look at recent U.S. activity, click here.) We can expect to see the area of sustainable lending grow and the market to continue to innovate as it seeks to marry sustainability with general corporate purposes.
For more information on the LSTA’s green lending initiative, contact Tess Virmani.