Validate projects against the LMA's 5 Core Components for Transition Loans with AI-powered scoring and gap analysis.

Overview

The LMA Transition Eligibility Validator is the core feature of Verdex. It assesses projects against the LMA's 5 Core Components for Transition Loans, as defined in the Guide to Transition Loans (October 2025).

💡LMA Transition Loan Guide

The LMA Transition Loan Guide provides the first comprehensive framework specifically for transition loans, making compliant transition finance more critical than ever. Verdex implements these principles for automated assessment.

The 5 Core Components

Based on the LMA Transition Loan Guide (October 2025), every transition loan must address these 5 Core Components:

#	Component	Max Score	How Verdex Validates
1	Transition Strategy	20	AI analysis of strategy documents, Paris alignment check
2	Use of Proceeds	20	Eligibility check against transition activities
3	Project Selection & Evaluation	20	Gap analysis, sector alignment, criteria matching
4	Management of Proceeds	20	Documentation templates, tracking requirements
5	Reporting	20	KPI generator, disclosure framework

Scoring Framework

Projects receive a total score out of 100, with eligibility determined by threshold levels:

≥60

ELIGIBLE

Meets transition loan criteria

30-59

PARTIAL

Improvements needed, conditional eligibility

<30

NOT ELIGIBLE

Significant gaps exist

⚠️Greenwashing Penalty

Greenwashing risk detection can deduct 3-60 points from the total score based on identified red flags.

Validation Flow

Input Processing

Project PDF + Description + Emissions Baseline uploaded

AI Document Extractor

Extracts: Country, Sector, Project Type, Size USD, Emissions, Strategy

LMA Validator

Checks each criterion across all 5 components

Greenwash Detector

Red flag pattern matching and risk assessment

Results Output

Overall Score, Component Breakdown, Gaps & Recommendations, Risk Level

Technical Implementation

The validation engine is implemented in TypeScript with the following interface:

typescript

// LMA Validation Engine - 5 Core Components
interface ValidationResult {
  eligibilityStatus: 'eligible' | 'partial' | 'ineligible';
  overallScore: number;
  components: {
    transitionStrategy: ComponentScore;      // Max 20
    useOfProceeds: ComponentScore;           // Max 20
    projectSelection: ComponentScore;        // Max 20
    managementOfProceeds: ComponentScore;    // Max 20
    reporting: ComponentScore;               // Max 20
  };
  greenwashingRisk: 'low' | 'medium' | 'high';
  redFlags: string[];
  improvements: string[];
}

// Based on LMA Transition Loan Guide (October 2025)
const LMA_CORE_COMPONENTS = {
  transitionStrategy: {
    hasPublishedPlan: 8,           // Documented transition strategy
    parisAlignment: 7,              // 1.5°C or well-below 2°C
    entityWideScope: 5              // Covers entire entity
  },
  useOfProceeds: {
    eligibleActivities: 10,         // Funds transition activities
    quantifiableReductions: 5,      // Measurable emissions impact
    noLockIn: 5                     // Avoids carbon lock-in
  },
  projectSelection: {
    alignedWithStrategy: 10,        // Supports transition strategy
    evaluationProcess: 5,           // Clear selection criteria
    sectorAlignment: 5              // Priority sector
  }
  // ... managementOfProceeds, reporting
};

💎API Access

The LMA Validator is accessible via the platform UI or through our API for integration into existing workflows. See the API Reference for details.