# How ambitious must a sustainability-linked loan target be for an MSME?

Canonical: https://senseible.earth/answers/how-ambitious-should-sll-targets-be

Ambitious enough to beat business as usual. Under the Sustainability-Linked Loan Principles, each target must be a material improvement beyond your current trajectory, compared where possible with your past performance, peers or a science-based reference. A target that your recent trend already reaches will not pass a lender's review.

## The three benchmarks lenders use

- Your own history: as many past years of the KPI as you have, measured the same way, with past performance referenced where possible.
- Peers: how similar plants in your sector perform, where data exist.
- Science: a pathway consistent with limiting warming, such as a sector pathway used by SBTi, or a national target that applies to your sector.
- The principles allow a combination. An MSME with no peer data can rely on its own trend plus a published pathway.

## Testing a target against your trend

1. Work out the average yearly change in the KPI over the last three years.
2. Project that change to the target year. This is business as usual.
3. Set the target clearly below the projection, and link the gap to named actions such as a furnace upgrade or rooftop solar.
4. Set a value for each annual test date, not only the final year.

## Gains that do not count as ambition

- A fall in Scope 2 that comes from a new, lower CEA grid factor rather than anything you did.
- An intensity fall from spreading fixed energy over higher output.
- A baseline picked from an unusually bad year, such as a year of long shutdowns.
- Selling or closing a high-emission unit, unless the baseline is restated.

## When a lender will push back

Expect questions if the target is already met at signing, if it relies on grid changes, or if it has no path between now and maturity. A verifier will check the KPI each year, so a target that cannot be traced to bills and production records is as weak as one that lacks ambition.

## Worked example: a forging unit's intensity trend

- Scope 1 and 2 intensity: 1.00 t CO2 per tonne (2022), 0.97 (2023), 0.94 (2024), a fall of about 3% a year
- Trend to 2027: 0.94 x 0.97 x 0.97 x 0.97 = 0.858 t per tonne
- A 2027 target of 0.86 is business as usual
- A target of 0.75, tied to an induction heater replacing a furnace oil furnace, goes beyond the trend
- Check grid effects: if grid power is 40% of the footprint and the grid factor falls 5%, that alone cuts intensity 0.40 x 5% = 2%

Figures are illustrative. Use your own three-year data and keep the same factors when testing the trend.

## What Senseible does here

Senseible shows Scope 1 and 2 from your bills year by year, with the factor on each line, so you and the lender can see the historic trend before a target is set. The KPI is then checked each year by an external reviewer the lender accepts.

- [SLL KPIs for an MSME](https://senseible.earth/answers/sustainability-linked-loan-kpi-examples)
- [What a verifier checks on an SLL KPI](https://senseible.earth/answers/sll-kpi-verification-what-verifier-checks)
- [SLL interest discount](https://senseible.earth/answers/sustainability-linked-loan-interest-discount)
- [Green loan readiness check](https://senseible.earth/green-loan-check)

Sources: [LMA, APLMA and LSTA Sustainability-Linked Loan Principles and Guidance (26 March 2025), calibration of SPTs](https://www.lma.eu.com), [Science Based Targets initiative, sector pathways and criteria](https://sciencebasedtargets.org)

Last reviewed 2026-10-18. Checked 18 October 2026 against the Sustainability-Linked Loan Principles and Guidance of 26 March 2025 (lma.eu.com); recheck for a newer edition before quoting its calibration wording.