Set the facility terms and the borrower's sustainability performance targets, then see which KPIs are met each year, how the margin moves, and what it is worth in cash.
Disclaimer. This tool is for illustrative purposes only. All inputs, outputs and figures are hypothetical and do not reflect any real transaction, borrower or facility. Nothing on this page constitutes investment, legal, financial or regulatory advice. No reliance should be placed on the outputs for any commercial or transactional purpose.
Typical investment-grade revolving credit facility. Amounts in EUR millions, margins in basis points. The margin floor sets the minimum the adjusted margin can reach — useful on tight-spread deals where lenders want to cap the borrower's ESG benefit. With default settings (base 35 bps, step-down 5 bps, floor 0) the floor never triggers because the best-case margin (30 bps) is already above zero. Try setting the floor to 32 to see it hold the margin there even when all KPIs are met.
Direction: 1 = lower is better (e.g. emissions), -1 = higher is better (e.g. renewable share). Weights should total 100%. Leave an actual blank to simulate a missing report.
Each KPI is tested on the annual compliance certificate. The adjustment applies to the margin of the following year.
Adjusted margin vs. the base margin, by year the margin applies.
How much less (green) or more (red) the borrower pays each year in drawn margin and commitment fees compared to the same facility with no ratchet, in EUR.
A KPI is met when (Actual - Target) x Direction ≤ 0. Multiplying by -1 flips the test, so one rule works for "lower is better" and "higher is better" KPIs.
A met KPI earns its weight x the maximum step-down; a missed or unreported KPI costs its weight x the maximum step-up. Unreported KPIs can be treated as missed or neutral.
The total adjustment is added to the base margin (never below the floor) once the compliance certificate is delivered, and applies to drawn margin and the commitment fee.