What does the LMA practice note on SLLs for SMEs say?

Published in September 2026, it shows lenders how to apply the Sustainability-Linked Loan Principles to independent SMEs without weakening any 'shall' rule. Small firms may start with a baseline target, use energy or fuel use as the KPI, report in proportion to their size, and use utility bills or certifications to support verification.

Who counts as an SME

• Use the SME definition of the market where the borrower operates. Where none exists, the IFC or SBTi definitions can be used.
• Only independent SMEs. A small subsidiary of a large group cannot use this guidance, though backing from a private equity fund does not by itself rule a firm out.
• The note adds no new label. The SLLP still prevail if anything conflicts.

KPIs a small firm can track

• KPIs can focus on the firm's own operations: energy use, direct emissions, or product and process impacts.
• Where there is no data yet, a clearly defined qualitative KPI can open the loan, as a time-bound step towards a measured one. The note calls this a stackable KPI.
• Getting or keeping a recognised certification can be a KPI on its own if it is relevant, material and objectively verifiable.
• Benchmarks can use proxy or limited peer data, as long as the source and method are stated.

The note's three-year example

1. Year 1: calculate a CO2e baseline using a recognised standard such as the GHG Protocol.
2. Year 2: set reduction targets covering at least operational emissions.
3. Year 3: deliver those reductions and keep adding emissions categories, such as value chain (Scope 3).

Targets still have to be ambitious

• Targets must beat business as usual and what regulation already requires. A baseline step cannot replace that.
• Where emissions come mostly from electricity or fuel, cutting kWh or fuel use can be a more practical target than recalculating emissions every time.
• A loan whose KPIs and targets are not agreed at signing is not an SLL and should not be called one. Deferred targets need a reason and a backstop date, ordinarily within 12 months.
• A large customer's supplier programme can shape the targets, provided they stay relevant to the SME's own business.

Reporting and verification in proportion

• Report at least once a year, with a statement on performance against each target. Lenders may help with the first report.
• External verification is still required where a target can change the loan terms. Audited disclosures, credible certifications or data straight from independent providers, such as utility bills, can support it.
• Where data has already been independently reviewed, lenders should not ask for more assurance unless it adds real credibility.

What Senseible does here

Senseible turns electricity bills and fuel invoices into a dated Scope 1 and 2 record with rule checks, which a small firm can use for its Year 1 baseline and to report an energy or fuel KPI each year. It does not set targets, price the loan or act as the external verifier.

• SLL KPI examples
• What an SLL verifier checks
• Green loan principles
• Green loans for MSMEs in India

Sources: Loan Market Association, Practice note on the application of the Sustainability-Linked Loan Principles to SMEs (September 2026), Loan Market Association, Sustainable Lending page

Last reviewed 2026-11-02.