Can a lender sign a sustainability-linked loan now and agree the sustainability targets later, under the Loan Market Association (LMA) guidance?

Under the LMA practice note, a loan whose key performance indicators (KPIs) or sustainability performance targets (SPTs) are not agreed before or at signing is not a sustainability-linked loan and should not be called one. A deferred structure should still give a reason, disclose strategy, set a backstop date and review later targets as strictly.

The first rule: no targets at signing, no label

The LMA's practice note on applying the Sustainability-Linked Loan Principles (SLLP) to small and medium-sized enterprises (SMEs), published in September 2026, carries a reminder on what it calls sleeping structures. Where KPIs and SPTs are not agreed before or concurrently with origination, a loan is not a sustainability-linked loan (SLL) and should not be communicated as such. The practice note page linked below covers that rule in general; this page is about what a deferred structure should still contain.

The words are "is not" and "should not". The note is voluntary guidance, and it separates mandatory "shall" requirements, recommended "should" items and optional "may" items.

The four things a deferred structure should include

1. A clear rationale for delaying the choice of KPIs or the setting of SPTs.
2. Disclosure of the borrower's sustainability strategy or objectives.
3. A defined backstop date for agreeing KPIs and SPTs, ordinarily within 12 months of origination.
4. An amendment process that subjects the KPIs and SPTs agreed after closing to the same scrutiny and attention they would have had at the outset.

Which structures this covers

The note says these considerations apply whatever the mechanism: sleeping structures, rendez-vous provisions, sustainability amendment provisions or similar deferred calibration mechanisms. In its list of SME challenges, it also records that sleeping loans and rendez-vous clauses add complexity and cost.

Not the same as a baseline year inside the loan

For SMEs without historical data, the note separately allows the first phase of a loan to include building a reliable baseline, if the method, the timeline for the baseline and the later target-setting process are clearly documented at inception. It also allows preparatory targets, such as calculating a first greenhouse gas footprint, if they are time bound and lead toward measurable results. My reading: the difference is that the baseline method, its timeline and the target-setting process are written down on day one, not left for later. The note still expects preparatory targets to be time bound and to lead toward measurable results, and a lender must confirm whether a given structure keeps the sustainability-linked loan label.

Questions to put to the lender

• Is any KPI or target agreed in writing at signing, or is the whole set deferred?
• If deferred, what is the written reason, and what is the backstop date?
• What happens at the backstop date if no agreement is reached?
• Will the targets set later be reviewed as strictly as those set at signing?

Example: the backstop date

• Loan signed 1 March 2027 with the targets deferred.
• Ordinary backstop: within 12 months, so by 1 March 2028.
• A stackable alternative, as the page reads the note: sign on 1 March 2027 with a Year 1 target to build the baseline and a Year 2 target to cut kilowatt hours, both written into the loan on day one. Ask the lender to confirm it keeps the label.

Dates are examples. The note says "ordinarily" within 12 months, so a lender could set another date with reasons.

What Senseible does here

Senseible reads fuel invoices and electricity bills into monthly records, so a baseline year of kilowatt hours and fuel can be on file before a loan is signed. It does not structure loans or set targets.

• What the LMA practice note says for SMEs
• How ambitious should targets be?
• Green loan or sustainability-linked loan?
• Green loan readiness check

Sources: LMA, Practice note on the application of the Sustainability-Linked Loan Principles to SMEs, September 2026

Last reviewed 2026-11-05. The practice note is guidance and the Sustainability-Linked Loan Principles themselves prevail. This page reads the note's summary of the principles, not the principles' full text. Re-check the LMA site for updates.