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ELFA Publishes New ESG Deal Disclosure Questionnaires

The European Leveraged Finance Association (ELFA) has published new questionnaires on ESG provisions in both leveraged loans and high yield bonds in response to demand from investors for greater transparency on the key aspects of these terms. The tools form part of ELFA’s New Deal Disclosure Questionnaire Series.

Sabrina Fox, Chief Executive Officer, European Leveraged Finance Association, commented: “The nature of a borrower’s ESG provisions has become a key aspect of credit analysis in European leveraged finance deals. Provisions are still largely bespoke, and the market lacks consensus on the format of disclosure. The ESG Provisions in High Yield Bonds Questionnaire and ESG Provisions in Leveraged Loans Questionnaire are part of our New Deal Disclosure Questionnaire Series. The questionnaires are designed to support investor diligence and engagement with borrowers, addressing the risk of greenwashing reflected in such provisions.”

Each questionnaire outlines key topics under three main pillars – Sustainable Performance Targets (SPTs), Reporting, and the structure of ESG provisions in bonds or the structure of the ESG margin ratchet in loans.

The New Deal Disclosure Questionnaire Series aims to help align market expectations about the topics that investors expect to cover with borrowers and their advisers during the roadshow. The questionnaires are intended to serve as a starting point for important discussions between borrowers and investors regarding provisions, but are not intended to replace either customised investor ESG due diligence or analysis of the material ESG risks that a company faces.

A recent ELFA survey on ESG provisions in leveraged finance documents showed that 96% of respondents agreed that a standardised questionnaire would support discussions with borrowers about provisions in green, sustainability and ESG-linked products.

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