Two different products
A green loan funds a defined qualifying purpose: an energy efficiency programme, a renewable installation, a fleet transition. Use of proceeds is restricted and reported.
A sustainability linked facility is different. Proceeds are unrestricted, but the margin moves up or down depending on whether the borrower hits agreed performance targets, such as an emissions intensity reduction or a measurable safety improvement.
What lenders ask for
Expect questions on energy consumption, waste, supply chain provenance and, for larger borrowers, a baseline emissions figure. Larger banks increasingly need this data to satisfy their own reporting obligations, so it is asked regardless of whether the facility carries a sustainability label.
The practical requirement is a credible baseline and a repeatable measurement method. Ambition without measurement will not support a linked margin because there is nothing to verify.
Is the margin benefit worth it
Margin adjustments are usually small, often a few basis points in each direction. On a modest facility that will not cover the cost of verification and reporting. On a large facility it can be material.
The stronger argument is access rather than price. Businesses with a clear transition plan are finding a wider lender pool, particularly for long dated debt on industrial and property assets exposed to future regulation.
Avoiding the obvious trap
Targets that are set casually become covenants. Missing them can trigger a margin increase and, more damagingly, a reporting narrative you then have to explain to every future funder.
Set targets you can evidence with data you already collect, or with data you have a funded plan to start collecting. Anything else creates avoidable risk for a small pricing gain.
Frequently asked questions
Is this only relevant to large companies?
No. Smaller borrowers increasingly face the same questions, though formal linked structures remain more common above the mid market.
Does external verification get required?
For linked facilities, usually yes at least annually, and the cost should be factored into the comparison.
Can an asset finance deal be green?
Yes. Electric fleet, solar and efficiency equipment are routinely funded under green labelled asset facilities.
Last reviewed: 2026-09-06