FCA update on sustainability-linked loans market

The UK Financial Conduct Authority (FCA) published a letter to heads of sustainable finance on the sustainability-linked loan (SLL) market and by way of update since the FCA's previous letter on this topic in 2023. The FCA report improvements in the market for SLLs, with better practice and more robust product structures, but continue to observe barriers to scaling the SLL market and some concerns around incentives. The FCA will continue to monitor the SLL market and will work closely with the Transition Finance Council (TFC) to promote the competitive position of the UK as a transition finance hub. Firms are encouraged to engage collaboratively with the TFC's work and the Loan Markets Association, to build alignment in approaches to transition finance.

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