How do green loans differ from traditional loans?

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Green loans and traditional loans differ in their purpose, eligibility, interest rates, and other factors.

Parameter	Green Loans	Traditional Loans
Use of loan proceeds	Funds can only be used for eligible green projects such as renewable energy, green buildings, clean transportation, pollution prevention, etc.	Funds can be used for any legal purpose without restrictions.
Eligibility criteria	Stricter eligibility criteria for applicants and projects to qualify as green. Requires compliance with recognised Green Loan Principles.	No specific eligibility criteria beyond the financial institution's standard credit policies.
Interest rates	May offer lower interest rates compared to traditional loans since they are seen as less risky by loan providers.	Standard interest rates apply based on the applicant's credit profile and market rates without consideration for environmental benefits.
Tax incentives	Availability of tax incentives, subsidies or grants from governments and agencies to encourage green loans.	Generally, there are no special incentives or grants.
Environmental impact	Intended to have a positive environmental impact aligned to climate goals through funding of green projects.	No consideration of environmental impact while funding general business activities

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