In brief: Update on ESG loan guidance

The European Leveraged Finance Association has updated its ESG factsheets with tougher criteria for loans in certain sectors. The factsheets contain sector-specific guidance for the most important areas of ESG disclosure for the autos, building materials and services sectors including ESG key performance indicator tables. ELFA said its engagement with the investor community revealed further KPI disclosure from borrowers is needed. Metrics include energy consumption, greenhouse gas emissions and board diversity.

In autos, disclosures include transitions to the phase-out of internal combustion engines, expected to begin in many jurisdictions in 2035, use of new technology, impact of sites on biodiversity and more. For building materials, among the key KPIs lenders should be tracking are greenhouse gas emissions, exposure to hazardous chemicals, sustainable sourcing and recycling of materials. Among services companies, ELFA is looking for greater disclosure of employee health and safety, labour standards, training and satisfaction.

In addition to the sector-specific factsheets, ELFA has also published updated versions of its existing factsheets that incorporate the latest feedback from the industry.

Sabrina Fox, chief executive of ELFA, said: “Through our workshop discussions, we found that whilst there has been positive progress by companies in ESG data disclosure, investors sought concrete KPIs and standardisation within ESG reporting, which we have aimed to address by introducing ESG KPI tables within the ESG Fact Sheets. Governance and transparency remain essential focus areas for investors.”