The Social Loan Principles (“SLP”) comprise voluntary recommended guidelines, to be applied by market participants on a deal by deal basis, which recommend transparency and disclosure and seek to promote the integrity in the development of the social loan market by clarifying the cases in which a loan may be categorised as being “for social purposes”.

We highlight for you the key elements of this new standard. Do not hesitate to reach out to one of our team members for more information.  

Social Loan vs. Sustainability-Linked Loan

Social Loans are any type of loan instrument made available to finance or re-finance, in whole or in part, new and/or existing eligible “Social Projects”. Like a Green Loan, a Social Loan is a “Use of Proceeds”-driven instrument: the loan proceeds will be exclusively used for the financing of Social Projects.

A Social Loan is thus different from a Sustainability-Linked Loan (with a social target) as the latter is a performance-driven instrument. In the case of a Sustainability-Linked Loan the borrower is incentivised (often through a margin reduction) to meet measurable sustainability targets. The obtained funding may however be used for any purpose, including working capital.

Alignment with Social Bond Principles

To promote consistency across financial markets, the Social Loan Principles build on and refer to the Social Bond Principles (“SBP”), administered by the International Capital Markets Association (“ICMA”). This is reflected both in the definition of Social Projects that are eligible for funding through a Social Loan and the definition of Target Populations for which the Social Projects should seek to achieve a positive social outcome, as well as the four core components that establish the SLP-framework.

These similarities must allow the SLP and SBP to be applied simultaneous without causing inconsistencies or conflicts.

Four core components of the Social Loan Principles

To be compliant with the SLP a Social Loan must align with the four core components. The first two focus on the appropriate selection of social projects. The last two components, which are copied from the Green Loan Principles must facilitate control to ensure that the funding allocated is used for the intended projects.

1. Use of proceeds: definition of Social Loan

Whether a loan can be classified as “social” is determined by the Social Project for which the funds are intended. For its qualification as a Social Loan the type of the underlying credit facility is of no importance. In principle, any type of loan instrument made available exclusively to finance or re-finance, in whole or in part, new and/or existing eligible Social Projects can align with the SLP.

No external review is required when assessing the social characterization of the Project. However, depending on the characteristics of the Projects or the in-house expertise of the lender and with a view of safeguarding market integrity, an external review such as a verification, certification or rating may be recommended.


Social Projects directly aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially but not exclusively for a target population(s).

The SLP acknowledge several broad categories of eligibility for ‘Social Projects’. In a non-exhaustive list they explicitly recognise: affordable basic infrastructure (drinking water, sanitation, telecommunication, energy,..); access to essential services (education, energy, transport, financial services,..); affordable housing; employment generation; food security and sustainable food systems and socioeconomic advancement and empowerment.

The SLP also provide a non-exhaustive list of ‘Target Populations’ which includes amongst others: people living below the poverty line; people with disabilities; migrants; unemployed; women and/or sexual gender minorities; and aging people and vulnerable youths. It is however possible that such Target Population(s) are also served by addressing the general public. An example of the latter are Social Loans which seek to channel capital towards COVID-19 related positive social outcomes which concern the general public.


A Social Loan can take the form of one or more tranches of a loan facility and may be made by way of a term loan or revolving credit facility.

Where funds are to be used, in whole or part, for refinancing, it is recommended that borrowers provide an estimate of the share of financing versus refinancing. Where appropriate, they should also clarify which investments or portfolios may be refinanced, and, to the extent relevant, the expected look-back period for refinanced Social Projects.

When applying the SLP to a revolving credit facility parties will need to determine how best to evidence the flow of funds to an agreed upon social objective. The revolving credit facility may include a specific social tranche but where that is not possible a borrower may seek to report to the lenders the use of any revolving borrowings and/or identify Social Projects supported by the revolving credit facility.

2. Process for project evaluation and selection

To facilitate a proper assessment by the lender, the borrower of a Social Loan must clearly communicate:

  • which social objective(s) the Project targets;
  • how the borrower determines that the Project fits within the SLP categories of Social Projects; and
  • which eligibility or exclusion criteria are used as well as any other process applied to identify and manage potentially material social and environmental risks associated with the proposed Project(s).

3. Management of proceeds

Just like Green Loans, the proceeds of a Social Loan should be credited to a dedicated account or otherwise tracked by the borrower in an appropriate manner. Management of proceeds should be attested to by the borrower in a formal internal process linked to the borrower’s lending and investment operations for Social Projects.

Where a Social Loan takes the form of one or more tranches of a loan facility, each tranche applicable to the Social Project must be clearly labelled, with proceeds of such tranche(s) credited to a separate account or tracked by the borrower in an appropriate manner.

4. Reporting

Borrowers should make and keep readily available up to date information on the use of proceeds, such information to be renewed annually until the Social Loan is fully drawn, and as necessary thereafter in the event of material developments. This information should include:

  • a list of the Social Projects to which the Social Loan proceeds have been allocated;
  • a brief description of the Project(s);
  • the amounts allocated; and
  • their expected impact.

Information must only be provided to those institutions participating in the relevant Social Loan.

We hope that these guidelines provide an extra tool in the ESG toolbox to efficiently promote socially responsible projects and activities.