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ARTICLE · 02 JULY 2020

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Green Loans

Camilleri Preziosi
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The term ‘green loan' has become increasingly omnipresent in economic and market discourse. What is a ‘green loan' and what distinguishes it from your typical ‘loan'?

European UnionFinance and Banking
Malcolm Falzon
Malcolm Falzon
Julian Bajada
Julian Bajada
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The term 'green loan' has become increasingly omnipresent in economic and market discourse. What is a 'green loan' and what distinguishes it from your typical 'loan'?

            Traditionally, a 'loan' is identifiable as such if the instrument in question satisfies three basic financial and legal criteria, namely that the instrument prescribes a specific purpose for which the funds advanced may be utilised; the instrument is for a specific term, upon the lapse of which the funds advanced must be repaid; and, lastly, the instrument attributes a financial cost to the whole affair, typically by way of charging interest, whether fixed, variable, or a combination of the two. Naturally, whilst these criteria describe a typical plain vanilla loan, it is possible to structure a more complex loan, with more onerous or complex terms and conditions.

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