# What must a borrower report on a sustainability-linked loan, and how is that scaled for a small firm under the Loan Market Association (LMA) practice note?

Canonical: https://senseible.earth/answers/sustainability-linked-loan-annual-report-contents

Under the Sustainability-Linked Loan Principles as summarised by the LMA, a borrower shall report at least yearly, and at each date relevant to a target test. The report shall let the lender monitor the key performance indicators (KPIs) and include a confirmation statement on the targets with a verification report attached.

## What the principles require, as the practice note sums them up

- Borrowers shall report at least annually, and also for any date or period relevant for assessing target performance that could lead to an adjustment of the loan's financial or structural terms.
- The report shall give lenders enough information to monitor the performance of the selected KPIs.
- It shall include a sustainability confirmation statement setting out performance against the sustainability performance targets (SPTs) and, where relevant, the impact and timing of any adjustment to the loan terms, with a verification report attached.
- Borrowers should publicly report information on the targets, including the method behind the calculations and any assumptions. "Should" is a recommendation, not a requirement.

## What changes for a small firm

- Reporting should be proportionate, practical and fitted to the borrower's own capabilities.
- Where possible, existing regulatory or voluntary disclosure frameworks that apply to small and medium-sized enterprises (SMEs) may be used to avoid duplication.
- Lenders may help with the initial structuring and the first period's reporting, particularly while reporting systems are still being built.
- Reporting should follow the borrower's existing processes, data cycles and systems.

## Targets tested on other dates

Under the second component of the principles, setting an annual target for each KPI is considered best practice, but borrowers and lenders currently have the flexibility on how often targets are set, if there is a strong reason that suits the transaction and the KPI. Where targets are tested on a non-annual basis, extra reporting should be given at each observation date needed to judge performance and any adjustment. Its frequency and scope should stay proportionate to the firm.

## A suggested report pack, built from the above

1. The KPI result for the period, with the formula and boundary the loan agreement defines.
2. The target for that period and whether it was met.
3. The sustainability confirmation statement, including any change to the loan terms and when it takes effect.
4. The verification report, where the target can change the loan terms.
5. A note of the method and assumptions, which you may also publish.

## Where bills fit

For a KPI based on fuel or electricity use, the pack rests on dated bills and invoices month by month, and the practice note says data from independent providers such as utility bills, waste reports or certification bodies can help satisfy the verification requirement, particularly where the data is already subject to independent review, and it is for lenders to consider. Fuel invoices are not named there. The verification page linked below covers what a verifier checks.

## Example: one reporting year for an electricity intensity KPI

- Electricity used 480,000 kWh over 1,200 tonnes of output: 480,000 / 1,200 = 400 kWh per tonne
- Target for the year: 420 kWh per tonne. 400 is below 420, so the target is met.
- The pack carries this result, the confirmation statement and the verification report.

Kilowatt hours (kWh), output and target are examples.

## What Senseible does here

Senseible reads fuel invoices and electricity bills into monthly records, so the monthly kilowatt hours and litres behind a KPI sit in one place. It does not write a lender's confirmation statement or verify the KPI.

- [What a verifier checks on a loan KPI](https://senseible.earth/answers/sll-kpi-verification-what-verifier-checks)
- [What the LMA practice note says for SMEs](https://senseible.earth/answers/sustainability-linked-loan-sme-practice-note)
- [What happens if a target is missed](https://senseible.earth/answers/sll-kpi-target-missed-what-happens)
- [Green loan readiness check](https://senseible.earth/green-loan-check)

Sources: [LMA, Practice note on the application of the Sustainability-Linked Loan Principles to SMEs, September 2026](https://www.lma.eu.com/application/files/7117/9006/5478/LMA_Practice_Note_on_the_application_of_the_SLLP_to_SMEs_-_22_September_2026.pdf)

Last reviewed 2026-11-05. These requirements are quoted from the practice note's summary of the principles, not from the principles' own text. Verification is asked for where a target is relevant to a potential adjustment of the loan terms, which is narrower than a flat yearly check on every target. Re-check the principles and your facility agreement.