A green loan is a type of loan specifically intended to finance environmental or climate-friendly projects. They typically receive more favorable terms from lenders compared to conventional loans, as a way to incentivize green projects. Some key characteristics of green loans:
Use of Proceeds: The loan proceeds are used for projects or activities with environmental benefits, such as renewable energy, green buildings, clean transportation, pollution prevention, recycling etc.
Green Credentials: The borrower provides details on the specific green projects, and the lender reviews the environmental impact and credentials of those projects.
Tracking/Reporting: Borrowers track and report on the use of proceeds and environmental outcomes.
External Reviews: Many green loans will have a second-party opinion or verification from external consultants to validate the sustainability credentials.
They lean towards Discretionary Lending and typically not a loan type that you can "shop" around.