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Sustainable Finance

The focus on sustainable finance continues to have a huge impact on the financial services across sectors and geographies.

The commercial impacts are accompanied by significant changes to the legal, regulatory and reputational risk profiles of businesses operating in the sector. The evolving ESG financial product range has continued to grow, creating opportunities and challenges for the full spectrum of market participants.

Since the launch of the EU’s sustainable finance legislative package, the wave of regulatory change in EU, the UK and across the rest of the globe continues at speed and without an end in sight. Consideration of ESG factors is now a de facto aspect of corporate reporting, product disclosure, investment decision making and risk management, all of which come together as capital is driven into sustainable economic activities.

As a practice we are supporting banks, asset manager and fund clients, insurers and pension funds and those operating in sectors less familiar with financial services regulation – for example the rating agencies, those trading carbon credits – as they grapple with their obligations in this evolving regulatory landscape.

Linklaters works with clients every day on the full gamut of sustainable finance law and regulation. Our global reach and multidisciplinary approach combines:

  • broad, deep and market-leading practice on ESG regulation;
  • outstanding financial and prudential regulatory expertise;
  • market-leading corporate, banking and capital markets transactional practices; and
  • a highly experienced environment practice recognised for its environmental, climate, human rights and governance expertise, delivered as one team, seamlessly, with a consistently pragmatic and commercial approach.

How Linklaters can help you

Sustainable finance regulation

Having a broad, deep and multi-disciplinary understanding of the span of demanding and fast-paced regulatory reforms, we advise many buy-side firms, sell-side firms and corporates on the way in which the new and emerging regulatory requirements will impact their institutions and on the compliance programmes and disclosures necessary to achieve compliance at both entity and product level. Our global practice means we are able to match our in-depth knowledge across geographies with our clients’ global footprints and bring that knowledge together to advise on the challenges in achieving global compliance, particularly where the myriad requirements are far from harmonised. We advise many of the largest asset managers and investment funds on how to comply with the new and emerging requirements; we advise numerous global banks on the disclosure, risk management, prudential and product challenges they face from sustainable finance developments; and we advise many other types of financial institution, for example insurers, pension funds, rating agencies and trading platforms on the impact of sustainable finance on their organisations. Closely watching the development of detailed, technical standards in this space, and with strong links to many industry associations, we are able to provide rigorous legal analysis of legislation, rules and policy guidance with the ability to benchmark their practical implementation in the market.

As with every major area of regulatory reform, governance and control to embed it within an institution will be a core concern of the regulators. With our understanding of our clients’ existing organisational framework and governance structures, we are able to advise senior management teams on how responsibility for ESG risks and opportunities should be mapped, managed and harnessed across the institution.

Funds and investment management

We offer sustainable fund set-up and conversion with first class expertise in real estate, infrastructure, private equity and debt funds. We also provide ongoing ESG advice during the fund’s life to support clients to manage ESG risks and benefit from ESG opportunities. We advise our investor clients (including sovereign wealth funds and pension schemes) when investing into a fund to ensure their own specific ESG policies as well as any applicable regulations are addressed in the terms agreed with the fund sponsor in light of sponsor’s own obligations and market practice. Additionally, we advise investor clients on their own ESG strategy, policies and procedures. Finally, we provide holistic advice to our clients (those managing funds and those investing into funds) on strategic positioning of their organisation on a short, mid, and long-term basis taking into account geographical differences.

ESG bonds

Our market-leading DCM practice advises on green, social and sustainability use of proceeds bonds and sustainability-linked bonds, offering cutting-edge expertise across the full range of capital markets products. We regularly advise corporate issuers and banks on these types of bond transactions and have regular dialogue with a range of market participants, including issuers, structurers and investors.

Our ESG bond practice and experience span our European, North American and Asian offices and draw on the support of the firm’s market-leading tax, corporate, ESG, energy and regulatory capital practices to provide clients with a full-service offering.

ESG loans

Linklaters is a leader in green, social and sustainability-linked lending and our market-leading banking lawyers regularly advise borrowers and lenders on all aspects of these transactions across the credit spectrum. Our sophisticated understanding of the markets in which our clients operate and the challenges they are likely to face, enables us to deliver innovative solutions on a global scale. We are at the forefront of legal and regulatory developments in ESG across Europe, Asia and the US, as national and regional regulators drive changes to the banking landscape. Our banking lawyers also draw on the support of the firm’s market-leading capital markets, corporate, tax, environment and climate change, energy and regulatory capital practices to provide clients with a full-service offering.

Derivatives and structured products

The derivatives and structured products space has seen increased interest in sustainable investment op-opportunities. We are seeing “green” regulatory capital transactions and synthetic securitisations, green structured notes (including repackagings of sustainable commodities, repackagings of green and blue bonds and structured notes with payouts linked to green benchmarks and funds) and sustainable swaps. The DSP team have also been advising benchmark administrators on the application of the new ESG benchmark disclosure requirements. They work closely with the environment team whose carbon and forestry commodities practice complements their own.

Commodities – carbon

Our specialist carbon team has been at the forefront of the carbon markets for over 15 years. Linklaters is one of a very few firms which continued to actively support clients in this field throughout the carbon market downturn of the past few years. And as a result we have acted for governments, public-private organisations, multilateral organisations, finance institutions and private entities alike on the market’s most significant carbon transactions, such as advising the World Bank on an innovative rainforest bond used to finance a REDD+ project in Kenya.

We are proud to have advised across the full spectrum of potential deal structures, including carbon offtakes, intermediations, pre-pays, carbon financings, equity investments, carbon funds (compliance and financial), credit packages, carbon-structured notes and carbon-linked notes. We have acted for clients in developing carbon offset programmes and climate finance arrangements, including innovative forestry transactions.

Selected sustainable finance experience

Several global banks, investment firms and asset managers: At a product level, we have supported clients on projects relating to the scope and implementation of the EU Sustainable Finance Disclosure Regulation (SFDR), ESG-related amendments to MiFID/AIFMD/UCITS in the EU, the UK Taskforce on Climate-related Financial Disclosures (TCFD), and the EU Corporate Sustainability Reporting Directive (CSRD).

An independent asset manager: advising on the set up of an Article 8 real estate fund and overall ESG implementation project as lead counsel including reviewing organisational policies and procedures, training teams.

A global investment management firm: strategic organisational advice and advising on the analysis and categorisation of funds and segregated accounts under the SFDR, setting up Article 8 funds and on their overall ESG implementation project as lead counsel including reviewing organisational policies and procedures, advising on positioning in the US and EU markets and training teams. 

Iberdrola: advising the lenders on two revolving credit facilities for Iberdrola for a total amount of €5.3bn, involving the conversion of each facility into a green loan.

Vodafone Group Plc: advising on the US$4bn and €3.9bn revolving credit facilities, involving a ESG margin adjustment mechanism based on the company’s performance against applicable KPIs.

Credit Suisse and Citi: advising on the World Bank's Wildlife Conservation Bond, the first-of-its-kind, outcome-based, financial instrument that channels private sector investments to achieve conservation outcomes. Also known as the “Rhino Bond", the US$150m five-year bond issued by the International Bank for Reconstruction and Development (IBRD) will contribute to protecting and increasing black rhino populations in two protected areas in South Africa, the Addo Elephant National Park and the Great Fish River Nature Reserve.

The Republic of Chile: advising on ground-breaking sovereign sustainability-linked US$2bn bond due 2042, which represents the first sustainability-linked bond by a sovereign issuer worldwide. The notes were issued pursuant to the Republic of Chile’s Sustainability-Linked Bond Framework, which the Republic of Chile adopted in February 2022 and sets out goals with respect to two key performance indicators: (i) absolute greenhouse gas (GHG) emissions, and (ii) the share of non-conventional renewable energy generation in the Republic of Chile’s national electric system.

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Key Contacts

For more information on how our ESG team can support you, please get in touch with one of the contacts below.

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