Banks are one of the reasons businesses with no legal duty to report end up measuring their carbon. Green finance comes with conditions, and most of them are about evidence. This post sets out what the market's own rules ask for, and how to have the figures ready before you apply.
Two kinds of green lending
The Loan Market Association (LMA), with its American and Asia-Pacific counterparts, publishes the principles the loan market uses to label a loan green or sustainability-linked. The current versions are dated 26 March 2025.
| Green loan | Sustainability-linked loan | |
|---|---|---|
| What the money is for | Only eligible green projects | Usually general business purposes |
| What makes it green | The use of the money | Targets the borrower commits to meet |
| What changes if you do well | Nothing in the principles themselves; any pricing benefit is up to the bank | The loan's terms, most often a lower margin when targets are met and a higher one when they aren't |
| Reporting | Each year until the money is fully allocated: projects, amounts and expected and, where feasible, achieved impact | At least each year: performance against each target, with a verification report |
What a green loan asks for
The Green Loan Principles have four core components:
- Use of proceeds. The money must go to green projects with clear environmental benefits, which the borrower assesses and, where feasible, quantifies. The principles list categories including renewable energy, energy efficiency, clean transport, green buildings, pollution prevention and the circular economy.
- Project evaluation and selection. The borrower explains the environmental objective and how it decided the project qualifies.
- Management of proceeds. The money is kept in a dedicated account or otherwise tracked.
- Reporting. Up-to-date information on how the money was used, renewed each year until it is fully allocated. The principles recommend quantitative measures where feasible, such as greenhouse gas emissions reduced or avoided, along with the method and assumptions behind them.
In practice, high-street green lending for most businesses is tied to specific assets. NatWest, for example, says its Lombard finance for climate and sustainable assets covers assets including batteries, electric vehicles, boilers, LED lighting and solar panels. Each bank sets its own eligibility, so check the current terms with your bank.
Where carbon data helps is the impact line. A footprint from before the project gives you a baseline, and the next year's footprint shows what changed. Our worked examples for LED lighting, heat pumps and rooftop solar show the kind of figures you can expect.
What a sustainability-linked loan asks for
The Sustainability-Linked Loan Principles have five core components, and this is where carbon data matters most.
- KPIs. They must be relevant, core and material to the business, measurable on a consistent method, benchmarkable and, where feasible, externally verifiable. The borrower defines each one, including its scope, calculation method and baseline. Greenhouse gas emissions are an obvious candidate for many businesses.
- Targets. Set in good faith, ambitious beyond business as usual and any regulatory requirement, and normally one for each year of the loan. The principles recommend, where feasible, at least three years of track record on the KPI.
- Loan characteristics. The terms vary with performance, most often through the margin.
- Reporting. At least once a year, up-to-date information on each KPI and a confirmation statement of performance against the targets.
- Verification. Independent, external verification of performance against each target is a necessary part of the principles, by a qualified reviewer such as an auditor.
The September 2026 practice note for smaller borrowers
The LMA recognised that three years of data and external verification are a lot to ask of a business that has never measured. In September 2026 it published a practice note on applying the Sustainability-Linked Loan Principles to smaller, independent companies. It doesn't change the principles' requirements, but it shows how lenders can apply them proportionately:
- Operational KPIs. KPIs can focus on what is closest to the business, such as operational energy use or direct greenhouse gas emissions. Where emissions come mainly from electricity or fuel, the note says measuring kWh or fuel use may be a more practical basis for targets.
- A baseline first. Its example of a "stackable" structure is: year 1, calculate a CO2e baseline using a recognised standard such as the GHG Protocol; year 2, set reduction targets covering at least operational emissions; year 3, deliver the cuts and start mapping Scope 3.
- Customers' expectations count. For businesses in established supply chains, the note says a large customer's sustainability expectations and data requirements may provide a practical basis for the KPIs and targets.
- Proportionate verification. Existing audited disclosures, credible certifications, or data from independent sources such as utility bills may support the verification requirement.
The practice note is guidance for lenders, so how far your bank uses it is up to the bank. But it shows the direction: a measured baseline from your own bills is the starting point lenders are looking for.
Being ready without a legal duty
Most businesses talking to a bank about green finance have no legal duty to report carbon. You can still have everything a lender is likely to ask for:
- A baseline footprint for your latest 12 months, Scope 1 and 2 at least, using the GHG Protocol and the UK government conversion factors for that year. Our footprint guide walks through it.
- The underlying activity data: kWh of gas and electricity and litres or miles of fuel, by year and site. Lenders may set targets on these directly.
- More than one year if you can. Going back to earlier years' bills, with each year's own factors, gives the track record the principles recommend.
- A reduction target and plan with a base year, a target year and the main actions. A Carbon Reduction Plan does this in a recognised format.
- A clear method statement saying what is included, the period, the boundary and the factor year, so a verifier can follow it.
The same figures answer customer questionnaires and tenders, so the work isn't only for the bank. Our guide to carbon reporting when the law doesn't require it covers the other reasons to report and what level of reporting fits. And if you talk about the loan publicly, keep to what you have measured: a green loan doesn't make a business green, and the Green Claims Code applies to what you say.
How Carbon Recycling helps
Start free with the kWh to CO2e calculator, which turns the kWh on your bills into CO2e with the 2026 government factors, side by side with 2025.
Carbon Recycling keeps your kWh, fuel and mileage by year and site, works out Scope 1, 2 and 3 with the government factors for each year, and shows the factor behind every figure, which is what a lender or verifier will want to follow. You can add earlier years to build a track record, and the Carbon Reduction Plan sets your target and tracks each year against it. Carbon Recycling doesn't verify your figures; your lender will tell you who it accepts for that. The 14-day free trial needs no card: you can add your data and see your reports, though printing and downloading them needs a plan. Plans start at £59 a month plus VAT (see pricing).