Sustainability-Linked Loans in the Netherlands: where the market stands.
Sustainability-linked loans (SLLs) have become one of the more visible products in Dutch corporate lending over the past decade. Unlike green loans, which restrict the use of proceeds to specific environmental projects, an SLL is a general-purpose facility in which the margin moves up or down depending on whether the borrower hits agreed ESG performance targets. The structure is attractive precisely because it does not require a "green" business model: any company prepared to commit to measurable sustainability KPIs can in principle access one.
A Dutch first, now a global standard
The Netherlands has a genuine claim to having started the product. ING extended what is widely regarded as the first sustainability-linked loan, to Philips in April 2017, and has continued to position itself as a leading provider since. The market gained real structure two years later, when the Loan Market Association (LMA), the LSTA and the APLMA jointly published the Sustainability-Linked Loan Principles (SLLPs) in March 2019, setting minimum expectations on KPI selection, target-setting, and reporting. The principles were tightened again in 2021, making independent external verification of KPI performance effectively mandatory for a loan to credibly carry the SLL label.
Why borrowers and lenders use them
The appeal for borrowers is rarely the margin saving itself, which is typically modest. The more significant drivers are reputational: a documented sustainability strategy, a signal to stakeholders and employees that the company takes ESG seriously, and access to a deeper pool of ESG-mandated capital. For lenders, SLLs support their own net-zero and sustainable-finance commitments and give relationship banks a structured way to engage with, and monitor, a client's transition.
The greenwashing problem
The product's flexibility is also its central vulnerability. Because KPIs are negotiated bilaterally and disclosure is voluntary, it can be difficult for outsiders to assess whether a given loan's targets are genuinely ambitious or essentially decorative. Academic research using global loan data has found that a meaningful share of SLLs — roughly a third in one large sample — do not publicly disclose the KPIs or pricing mechanics that supposedly drive the "sustainability" label, and that borrowers with weaker disclosure tend to see their ESG performance deteriorate after issuance, consistent with the loans being used to certify a commitment rather than enforce one.
Dutch and European supervisors have taken note. The Dutch Financial Markets Autority (AFM) treats greenwashing prevention as a core supervisory priority and has published Guidelines on Sustainability Claims setting out when claims are sufficiently specific and substantiated, alongside its long-standing scrutiny of sustainability disclosures in bond prospectuses. The Dutch Central Bank (DNB), for its part, monitors greenwashing as a source of reputational and legal risk within its prudential mandate, and has worked with the AFM and European supervisory authorities (EBA, EIOPA, ESMA) on a coordinated approach to sustainability-related claims across the banking, insurance and capital markets sectors.
What this means in practice for borrowers and lenders
For anyone negotiating or financing an SLL under Dutch law, a few points are worth keeping in mind:
KPIs need to be specific, material to the borrower's business, and ideally benchmarked against an external standard rather than self-set. Targets that simply track a company's business-as-usual trajectory invite exactly the scrutiny the SLLPs were designed to prevent.
Independent verification of performance against the KPIs is no longer optional in any meaningful market sense, even where the loan documentation does not strictly require it — both for credibility with the market and as a defence against later greenwashing allegations.
Documentation should anticipate target renegotiation, drawdown mechanics where pricing ratchets are involved, and what happens if a KPI becomes unmeasurable or irrelevant mid-term, since these are common points of dispute as facilities mature.
Disclosure quality matters commercially as well as reputationally. Loans with higher-transparency KPI disclosure have been associated with a more favourable market reaction on announcement than those that are vaguer about mechanics — the opposite of what a "quiet" approach to disclosure might assume.
Outlook
Sustainable bond and loan volumes softened globally in 2025 after several years of rapid growth, reflecting both market conditions and growing investor scepticism about loosely structured ESG-linked products. That correction is, if anything, a healthy one: it suggests the market is starting to separate loans with real teeth from those that exist mainly for the announcement. For Dutch borrowers and lenders, the practical takeaway is that the SLL label itself confers little protection — what matters, increasingly under both market and supervisory pressure, is whether the underlying KPIs and verification mechanics can actually withstand scrutiny.
This update is for informational purposes only and does not constitute legal advice. No attorney-client relationship is created thereby.