E is for Earth Day… and ESG – April 2022 | Issue 172 – ESG Reporting and Disclosures: Moving the Industry Forward | Cadwalader, Wickersham & Taft LLP

Our focus on ESG in honor of Earth Day continues, and here we focus on the reliable disclosure of ESG data. Several large projects are underway to help lenders see a greater level of consistency and depth in the ESG reporting information produced by borrowers.

In June 2021, the LSTA produced an updated version of its ESG due diligence questionnaire for borrowers. The updates were largely in response to requests for better and more comprehensive quantitative data in ESG reports. To further assist lenders in ESG transactions, the LSTA released an Excel version of this document last week. The LSTA has designed this document, which has been widely adopted, as a general and flexible document intended to be useful for a variety of borrowers and for a wide variety of situations. It can be used for initial discussions between a lender and a borrower as well as for reporting in a live transaction. Additionally, borrowers from various sectors and at different levels of sophistication with respect to ESG practices can use this document.

Despite very useful tools like the LSTA questionnaire, ESG reporting is still in its infancy in many respects. Regulators, investors and others are demanding better and increasingly sophisticated quantitative ESG reporting, and they want this information to be reliable and comparable. To this end, the LSTA, Alternative Credit Counsel and PRI have collaborated to launch an ambitious “Harmonization Project”, which aims to develop a comprehensive ESG reporting tool for borrowers that will be useful to lenders in a variety of transactions. .

This ambitious undertaking is touted as good for lenders, borrowers, managers and investors. The goal of this new tool is for lenders, managers and investors to receive consistent data from borrowers of all types. This more standardized reporting tool will also benefit borrowers, as a standardized questionnaire will allow them to focus on reporting information in a consistent format rather than having to complete similar, but always different, questionnaires in different transactions.

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