Key Considerations In "Green Lending" And Sustainable Finance

An emerging trend in debt markets is the rise of "sustainable" or "green" loans. The products are loan instruments designed to reward borrowers that focus on predetermined sustainability performance goals. Achieving or not achieving these sustainability goals will typically affect the interest payable by the borrower over the term of the credit facilities.

Bloomberg estimates that global green and sustainability linked finance volumes exceeded US$30 trillion in 2018, and the trend has also recently come to Canada. For example, Maple Leaf Foods Inc. recently closed an amendment to its credit agreement with a syndicate of lenders led by Bank of Montreal, based on sustainability principles. Under this agreement, negotiated by McCarthy Tétrault as counsel for Bank of Montreal and a syndicate of lenders, Maple Leaf Foods Inc. will benefit from a reduction of the spread on the interest payable on outstanding loans if it achieves certain agreed upon sustainability targets