ESG guidance published for leveraged loans market

New checklist is designed to help companies disclose more meaningful ESG data

A trade body representing the US leveraged loans market has published an ESG questionnaire to assist corporate borrowers seeking capital.

The new checklist, published by the Loan Syndications and Trading Association (LSTA) is designed to help companies disclose more meaningful ESG information about their businesses and their lenders.

Developed with asset managers and investors, the new questionnaire is designed to be applicable for borrowers in all industries, regardless of the current scope of their ESG efforts.

“ESG criteria are becoming increasingly relevant in the corporate loan market as more institutional investors routinely require answers from investment managers to whom they allocate capital,” said Tess Virmani, executive vice president of the LSTA.

“This is forcing managers to seek out reliable ESG-related information from borrowers to inform their diligence and decision-making.

“The LSTA questionnaire is going to lay the groundwork for a more orderly, efficient and standardized process that helps borrowers better communicate the ESG information that is of most interest to the investing community.”

The LSTA estimates that US institutional leveraged loan market is worth an estimated $1.2 trillion.

Lee Shaiman, executive director of the LSTA, added: “Loan market participants are to be commended for proactively taking the initiative to drive more transparency and enhanced visibility around ESG factors.

“We look forward to continuing to actively participate in the important industry dialogue about ESG considerations.”

Examples of questions within the LSTA-produced document include:

• Do you have a formal ESG policy? If not, what are the intentions or concepts with respect to ESG

that you have identified?

• Which individuals have formal oversight of ESG issues at your company?

• Is ESG a factor in management performance evaluation or compensation?

• Do you adhere to any recognized ESG framework/standards?

• What ESG-related business issues have you identified for your company’s business?

• How is ESG performance being tracked?

• What is your company’s approach to board, management and workforce composition?