Environmental, social and governance (ESG) issues continue to be a focus for investment funds. Investors are increasingly looking at a fund’s strategy and agenda regarding sustainability, social and governance considerations in making investment decisions. Regulatory requirements are expected to further mandate additional disclosure and awareness on the part of sponsors. Likewise, financial institutions and other lenders are increasingly placing a higher degree of scrutiny on the ESG activity of their borrowers as they continue to develop their own ESG parameters or align financings to sustainability goals.

Consequently, interest in sustainability-linked loans (SLLs) in fund finance transactions continues to grow1. Given the size and strength of the fund finance market, incorporation of sustainability parameters has the potential to play a significant role in investment fund sponsors’ and lenders’ ongoing commitment to, and incorporation of, ESG policies and goals.

Following the launch of the Sustainability-Linked Loan Principles (SLLP) in March 2019, many lenders and borrowers in the fund finance industry have looked to the SLLP for guidance on the implementation of SLLs into fund finance transactions.

Our entire list of Sustainable Lending Library is available here.