Quistclose trusts and green projects

Abstract

This article analyses the relevance of Quistclose trusts in a situation in which lenders make green finance available to borrowers for environmentally sound and sustainable projects. This examination highlights how a transaction can be structured to increase the likelihood of such a trust being recognised. The article will also consider green loans (as defined by the Loan Market Association) since these loans have characteristics that can indicate the presence of a Quistclose trust. Beyond the practical aspects of creating a trust, the article explores whether a Quistclose trust can be useful when money is lent for green projects. It is possible to question if Quistclose trusts can motivate borrowers to be more conscious of how they use the loan money. In particular, the article discusses whether the fiduciary duty regarding the use of the funds can strengthen the integrity of certain loans.