The International Finance Corporation (IFC) states that for a loan to be identified as a green loan, its structure must align with the Green Loan Principles that provide an international standard. These principles are based on four fundamental components listed below:
- Use of Proceeds: Deliver obvious environmental benefits that the borrower will analyze, quantify, and report.
- Project Evaluation and Selection Process: The borrower of a green loan should disclose how they plan to analyze and choose projects to obtain it. The borrower must also describe how they will manage environmental and social risks associated with qualified projects.
- Management of Proceeds: The proceeds of a green loan must be credited to a designated account or tracked by the borrower to ensure transparency and support the integrity of the product.
- Reporting: The principles propose using qualitative performance indicators and, when possible, quantitative performance metrics (for example, energy capacity, power output, reduced/avoided greenhouse gas emissions, etc.).
Among international development banks, the International Finance Corporation (IFC) is the leading provider of green loans. To learn more about these and a few of IFC’s recent/active green loans, please visit:
https://www.worldbank.org/en/news/feature/2021/10/04/what-you-need-to-know-about-green-loans
