The growth of green and sustainability linked loans has been gaining increasing prominence in the global lending market. Linklaters is a leader in green and sustainability linked lending and our market-leading banking lawyers regularly advise borrowers, issuers and investors on all aspects of green and sustainability linked loan transactions. 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.

The derivatives and structured products space has seen increased interest in sustainable investment opportunities. In particular, 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.

Our market-leading structured finance practice advises on a range of green, social and sustainability products. We have acted for a number of UK corporates (Anglian Water, Thames Water, Yorkshire Water and South East Water) on green bonds, green private placements and sustainability bonds and most recently for Cadent in March 2020 on its debut EUR 500 million transition bond, which was the first transition bond issued in the UK.

In the broader structured finance market, we have also acted on SR-Boligkreditt and SEB’s issuances of green covered bonds and prior to that in 2016 we acted for Bank of China on its green covered bond issuance.

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.

Having a broad, deep and multi-disciplinary understanding of the span of demanding and fast-paced regulatory reforms, we advise many buy-side, sell-side firms and corporates on the way in which the new EU Sustainable Finance Regulation requirements will impact their institutions and on the compliance programmes and disclosures necessary to achieve compliance at both entity and product level.

The focus on this regime is particularly strong for the asset management sector and investment funds given the extensive disclosure requirements that will change its approach to ESG from March 2021. We are advising several large asset managers and investment funds on how to comply with the new requirements. 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 the complex package 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 an eye on the Commission’s Sustainable Finance Strategy, and 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.

There are also significant opportunities for well designed financial products that satisfy the EU Taxonomy, and we have advised clients on a number of “Taxonomy-eligible” funds to date.

As investees, companies will be on the receiving end of ESG information requests from asset managers and funds impacted by the Sustainable Finance regime and from data analytics providers and ratings agencies. They will face increased scrutiny of this information, and ultimately they may find their ESG performances affects how they access finance.  Listed companies will also be more directly affected by changes to the Non-Financial Reporting Directive, the Financial Conduct Authority’s consultation on whether to introduce mandatory climate risk reporting from 2022 and the impact of the EU’s Green Deal.