ESG Margin Ratchet

In this edition of In the Know, we look at Environmental, Social and Governance (ESG) standards in Sustainability Linked Lending (in both loans and bonds). We address the ESG margin ratchet, how it interacts with ESG targets and testing strategies, and potential reinvestment obligations arising out of those interest savings, in each case, within the European leveraged finance market.

In particular we look at:

• The ESG margin ratchet and what it involves
• Application, testing frequency and pricing
• Measuring ESG performance
• Sustainability performance targets and key performance indicators
• ESG ratings
• Ratchet application
• Reinvestment obligations

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