Home Knowledge Sustainable Finance Update: An Overview of the Latest Legal Developments in Sustainable Finance

Sustainable Finance Update: An Overview of the Latest Legal Developments in Sustainable Finance


As sustainable finance continues to dominate agendas in the financial services industry, we delve into some of the latest legal developments, from updates to the Green Loan Principles to the EU Sustainable Finance Disclosures Regulation (SFDR).

Green Loan Principles and Guidance Updated

On 11 February 2021, an updated version of the Green Loan Principles (GLP) and Guidance on Green Loan Principles (GLP Guidance) was published by the Loan Market Association, Asia Pacific Loan Market Association and the Loan Syndications and Trading Association. The GLP, initially launched in March 2018, set out a framework of market standards and voluntary guidelines that participants are encouraged to adopt across the green loan market.

The GLP and GLP Guidance have now been updated to include material social risks as a category to be considered by borrowers and lenders as part of the project evaluation and selection phase, in addition to material environmental risks.  This highlights the growing importance of the social responsibility aspect of sustainable finance.  

ESG Disclosure in Leveraged Finance Transactions

On 19 January 2021, the Loan Market Association and the European Leveraged Finance Association jointly published the Guide for Company Advisers to ESG Disclosure in Leveraged Finance Transactions. The guide is designed to serve as a practical tool for borrowers and their advisers to provide ESG disclosures in company offering materials and financial reports. 

ESG Risks for Credit Institutions and Investment Firms

On 3 November 2020, the European Banking Authority (EBA) issued for comment a discussion paper on the management and supervision of ESG risks for credit institutions and investment firms (the Discussion Paper). In the Discussion Paper, market-based methods for assessing ESG risks were identified and explained, with particular consideration given to risks associated with climate change and other environmental factors. Respondents to the discussion paper had until 3 February 2021 to submit their comments. Once the EBA has considered the feedback from the various stakeholders, it is scheduled to report to the EU on its findings by the end of Q3 2021.

On 1 March 2021, the EBA, leveraging off aspects of the Discussion Paper, issued a consultation paper on draft implementing technical standards on prudential disclosures on ESG risks in accordance with Article 449a of the Capital Requirements Regulation (EU) No. 575/2013, which is addressed to large institutions with securities traded on a regulated market of any EU Member State.  The consultation paper includes templates, tables and instructions that institutions can use in order to disclose relevant information on ESG risks, including transition and physical risks, and mitigating measures. The intention is to provide a framework for ESG disclosures that allows stakeholders assess banks’ ESG related risks and sustainable finance strategies. The deadline for comments on the consultation paper is 1 June 2021.

Sustainable Finance Disclosures Regulation

SFDR was published in November 2019 with an initial effective date of 10 March 2021 (as discussed in detail by our Asset Management & Investment Funds team – see here and here).  In summary, the SFDR, along with related and delegated measures, obliges financial product managers, manufacturers, distributors and financial advisers to assess and disclose the ESG risks of investment decisions or advice, to assess and disclose (for certain entities, on a comply or explain basis) any negative impact of investments or advice on ESG issues and, for those products with an ESG element or target, to make enhanced pre-contractual, periodic and website disclosures.  The initial SFDR-compliance deadline of 10 March 2021 is, however, only the start of the journey in terms of increased ESG evaluation and disclosure for the financial services industry with many key SFDR obligations scheduled to take effect in 2021, 2022 and beyond.

Contact Us

William Fry has considerable experience advising on all aspects of sustainable finance and sustainable investments. For more information, please contact Siobhan Carlin, Jason Hollis, Lorena Dunne, David O’Shea or your usual William Fry contact.


Contributed by David O’Shea