Verification · 7 min read

Second Party Opinion vs Annual SLL Verification: What's the Difference?

By Audelya Editorial Team · Published 2 October 2026

A Second Party Opinion (SPO) assesses whether a Sustainability-Linked Loan is well designed, usually before signing: are the KPIs relevant and the SPTs ambitious? Annual verification checks, after each reporting period, whether the borrower actually achieved its SPTs. One reviews the structure; the other reviews performance.

What is the purpose of a Second Party Opinion?

An SPO is an independent assessment of the sustainability credentials of a financing structure. For an SLL, it typically evaluates the relevance and materiality of the KPIs, the ambition of the SPTs against the borrower's past performance, peers and science-based pathways where relevant, and the alignment of the loan's characteristics, reporting and verification arrangements with the SLLP.

When is an SPO performed?

An SPO is usually obtained during structuring, before or at signing. It may be updated if the KPIs or SPTs are materially changed later. The SLLP recommend a pre-signing external review; it is not universally mandatory, and many bilateral SLLs are signed without a formal SPO.

KPI relevance, SPT ambition and SLL structure

The core questions of an SPO are:

KPI relevance: is the KPI core and material to the borrower's business and sustainability strategy?
SPT ambition: does the target go beyond business as usual, with a clear timeline and baseline?
Structure: are the margin mechanism, reporting and verification arrangements consistent with the SLLP?

What is annual performance verification?

Annual verification is the independent, external check of the borrower's actual KPI performance against each SPT for the reporting period. The SLLP expect it at least once a year. It is usually performed as a limited or reasonable assurance engagement, and its conclusion is delivered to lenders to support the margin adjustment.

What evidence is required for each?

An SPO draws on the draft term sheet or framework, historical KPI data, the baseline, the borrower's sustainability strategy, sector benchmarks and peer data. Annual verification draws on period-specific source data (invoices, meter readings, production records), calculation workbooks, the agreed methodology and records of any scope change.

What is the difference between an SPO and annual verification?

The table below summarises the differences.

	Second Party Opinion	Annual SLL verification
Question answered	Is the SLL well designed?	Was each SPT achieved this period?
Timing	Structuring, before or at signing	After each reporting period, at least annually
Status under the SLLP	Recommended	Expected (core component)
Focus	KPI relevance, SPT ambition, structure	Reported KPI values, calculations, evidence
Evidence	Historical data, strategy, benchmarks	Period source data, workbooks, methodology
Typical provider	ESG research or SPO provider	Audit firm or specialist verifier
Output	Opinion on alignment and ambition	Assurance or verification conclusion per SPT
Main users	Lenders, borrower, wider market	Lenders, agent, borrower
Pricing impact	None directly	Drives margin adjustment

Timing and reporting

An SPO is a one-off report, sometimes published. Annual verification reports recur every period and are usually delivered with the borrower's compliance certificate within a deadline set in the facility agreement. Public disclosure of verification results is encouraged by the SLLP but depends on the contract.

Who uses each report?

Lenders use the SPO in credit and sustainable finance classification decisions; borrowers use it to demonstrate credibility. Lenders and the facility agent use annual verification reports to determine whether the margin steps up or down. Both may support the lenders' own regulatory and sustainability disclosures.

How do SPO and annual verification interact?

They are complementary. The SPO tests the design that annual verification later applies. A clear SPO, with well-defined KPIs, baselines and methodology, makes annual verification faster and less disputed. Conversely, issues found in annual verification, such as boundary ambiguity, often trace back to gaps in structuring. The same firm can perform both only if independence is properly managed.

Sources

Support for SPOs and annual verification

From Second Party Opinion preparation to recurring annual verification, Audelya keeps KPIs, baselines and evidence in one structured workflow for borrower, lender and verifier.

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