A practical guide for first-time borrowers preparing for Sustainability-Linked Loan assurance

Entering into a sustainability-linked loan (SLL) is a significant step, linking financing directly to measurable sustainability outcomes and business performance. For many organizations, it also marks the first time sustainability commitments move from disclosure into externally verified, financially material commitments.

As companies pursue SLLs to reduce cost of capital, strengthen ESG performance, and demonstrate credibility to stakeholders, independent assurance becomes critical to ensure performance is accurate, transparent, and trusted.

This can feel unfamiliar. What will assurance involve? What are lender expectations? How does it compare to other ESG assurance and verification How rigorous is it? And how can you prepare without creating unnecessary burden?

With the right preparation, independent assurance moves beyond compliance to enhance the strength and credibility of your SLL, while supporting improved business performance and unlocking financial advantages.

What to expect from Sustainability-Linked Loan (SLL) assurance

Assurance for Sustainability-Linked Loans typically focuses on two things:

  • Design credibility, are your Sustainability Performance Targets (SPTs) and KPIs clearly defined, measurable, and robust?
  • Performance accuracy, is your reported performance complete, accurate, and supported by evidence?

For first-time borrowers, the emphasis is on getting the fundamentals right, which means clarity, consistency, and a robust audit trail.

Assurance is not about catching issues late, it is about providing confidence to lenders that your SLL framework is credible and functioning as intended.

Why early preparation matters

One of the most common challenges we see with organizations embarking on this for the first time is that they often underestimating the level of definition and documentation required.

Unlike internal ESG tracking, SLL metrics need to be:

  • Clearly documented
  • Consistently applied
  • Independently verifiable

In practice, the biggest challenge we see is inconsistent definitions and lack of documented methodology and assumptions. Starting early allows you to build this in from the outset, avoiding disruption, rework, and delays during your first reporting cycle.

Five practical steps to prepare for SLL assurance

1. Start with clear, practical SPT and KPI Definitions

Each SPT and KPI should:

  • Have a clearly defined scope
  • Include an unambiguous calculation methodology
  • Align with recognised standards or existing disclosures where possible

A simple test, could an outsider calculate your SPT or KPI based on your documentation alone?

2. Make your SPTs and KPIs explainable

Ambition is important, but transparency and defensibility are critical.

Be ready to explain:

  • Your baseline and how it was derived
  • Why your targets are set at that level
  • The benchmarks or pathways you considered

Well-evidenced targets not only support assurance but also builds lender confidence.

3. Keep data simple and controlled

Many organizations unintentionally over complicate. Instead, focus on simplicity, consistency and controls. In our view, simplicity and clarity consistently outperform overly complex KPI frameworks.

  • Use existing systems where possible
  • Minimise overly complex calculations
  • Document how data is collected, checked, and approved

A simple, well-governed SPT or KPI is far easier to assure than a complex one with weak controls.

4. Clarify ownership early

SLLs typically span treasury, sustainability, finance, and operations.

Make sure you clearly define:

  • SPT and KPI ownership
  • Data responsibilities
  • Internal review and sign-off processes

This avoids confusion and delays once assurance is underway.

5. Build your evidence as you go

A common first-time challenge is leaving evidence collection too late.

Instead:

  • Maintain a clear audit trail throughout the year
  • Save source data and calculation files
  • Document key decisions and approvals

This will make the assurance process significantly more efficient and lower effort at year-end.

Common pitfalls in SLL assurance for first-time borrowers

From our 30 years’ experience, first-time borrowers often encounter the following challenges in SLL assurance:

  • SPTs and KPIs that rely on informal assumptions rather than documented methodologies
  • Data gaps identified too late in the reporting cycle
  • Misalignment with wider ESG disclosures and reporting frameworks
  • Last-minute evidence gathering ahead of assurance
  • Unclear ownership of ESG data and KPI responsibility

In reality, these are all fixable with early planning and a structured approach to Sustainability-Linked Loan assurance.

How ERM CVS can support

ERM CVS brings deep, global experience in annual assurance of Sustainability-Linked Loans, supporting clients across sectors and geographies.

We’ve worked with a wide range of first-time borrowers to:

  • Review SPT and KIP design upfront, helping clients strengthen them so they are more robust and will reduce assurance friction later
  • Identify and address data and control gaps early
  • Deliver efficient, pragmatic assurance aligned with market expectations
  • Provide clear, actionable insights that improve reporting maturity year-on-year

Our approach is collaborative and practical, helping you get it right first time, while building a framework that can scale as your sustainability strategy evolves.

Get in Touch

If you are preparing for your first Sustainability-Linked Loan, or want to assess your SLL assurance readiness, we would be happy to support.

Contact ERM CVS to discuss how we can help you prepare for Sustainability-Linked Loan assurance, strengthen your KPIs, and deliver a confident, credible, and efficient assurance process, here.