AccorHotels Group draws on its position as a sustainable leader to take the lead in Positive Incentive Financing.
This is therefore an industry involved in the life of its guests and its employees that is at the heart of the mass consumptions of many polluting products, including chemicals to plastics. It is also an industry that understands the need for sustainability - for preserving the planet's resources and its appeal.
This central role has led some of the most forward thinking companies in the field to take steps toward protecting the environment and focusing on a responsible development.
More generally, the deployment of sustainable initiatives in hotels is a key success factor as it relates to most of the drivers of the industry's growth, from cost efficiency and better guest experience, to tapping into economic incentives from local and governmental authorities and corporate and brand image. In a property management business, focused on long term efficiencies to optimise the yield on large early investments, such efforts drive business models and ultimately profitability.
The sustainable strategy efforts of such actors in the hospitality puts them in pole position to being able to take advantage of the benefits offered by green finance. As the scope of dedicated "green" products grows, forward-thinking companies like AccorHotels are paving the way for a more sustainable future, while lowering long-term risk assessment from investors and lenders and enhancing the cost of financing.
AccorHotels Group's sustained commitment to sustainability
One of the largest hospitality groups in the world, AccorHotels, has consistently taken the lead with its environmentally-driven Planet 21 Acting Here programme, in place since 2016 and built around four main pillars (employees, partners, guests and communities) and two priorities (F&B and buildings). These have been chosen in direct response to its business, environmental and societal challenges backed by quantifiable objectives that all hotels are expected to meet.
The group has clearly highlighted sustainable development and solidarity at the top of its list of priorities.
At the heart of its strategy, AccorHotels's values are expressed through the four commitments and two priorities of Planet 21, with the Group endeavouring to align its corporate agenda with the Agenda 21 signed by 173 heads of state at the 1992 Rio Earth Summit.
The Planet 21 initiative is the programme put together by AccorHotels in the context of its long-lasting ambition to be a pioneer for sustainability in the hospitality industry. Over the year, the group has consistently innovated and demonstrated a full corporate commitment.
The demand for green financial products continues to increaseThe market demand for green financial products has significantly increased with many more investors focusing on this new asset class over the last few years. But it was only two years ago that Green Loans and Positive Incentive Loans arrived in force on the market among other green financial products. The latter are tailor made approaches designed to accompany corporates at global or project specific level in their sustainability journey.
Positive Incentive Loans (PILs) are one of the fastest growing products, with a mechanism including discounts or premiums applied to the financing margin depending on the ESG score of the borrower. While Green Loans already represent a complement or an alternative to Green Bonds, Positive Incentive Loans are usually designed to insure liquidity and are therefore structured as Revolving Credit Facilities (RCFs), while being linked to the sustainability performance of the client.
"The wholesale green loan market aims to facilitate and support environmentally sustainable economic activity. The Green Loan Principles (GLP) have been developed by an experienced working party, consisting of representatives from leading financial institutions active in the green loan market, with a view to promoting the development and integrity of the green loan product."Source: Green Loans Principles, Loan Market Association
Both Green and Positive Incentive Loan usually cater to CSR leaders across a wide range of industries. As opposed to the capital expenditure (CAPEX) financing backed by a Green Loan, Positive Incentive Loan represents a general corporate purpose facility without any specific use of proceeds and incorporating a pricing mechanism linked to CSR or ESG performance. This performance is defined by a number of performance indicators (sustainable rating or indices, selected KPIs, etc.) usually reviewed by an independent third party.
|Green Loans||Positive Incentive Loans|
AccorHotels intends to make sustainability a core component of its long term financing strategy and aims at enshrining its corporate commitments about sustainability into its corporate practices. Perfectly aligned with that ambition, AccorHotels's most recent transaction is a 5-year, €1.2bn multi-currency senior unsecured revolving credit facility that will be used for general corporate purpose.
AccorHotels' Positive Incentive Loan facility
In line with AccorHotels' firm commitment to improve the group hotels' performance notably through ambitious sustainability initiatives, the terms and conditions of this recent transaction include (i) a correlation between AccorHotels' financing cost and its overall ESG performance; (ii) the introduction of an additional margin adjustment parameter linked to AccorHotels' ESG score.
Finally, the external ESG score required by the financing is provided by Sustainalytics while various provisions are included in the documentation to ensure adequate implementation and maintenance of the positive-incentive mechanism.
|Product||A multi-currency senior unsecured revolving credit facility|
|Date of Announcement||2 June 2018|
|Maturity||5 years with two potential 1 year extensions|
|Interest||Reference currency index + credit-based margin + premium/discount based on ESG rating|
|Counterparties||Relationship banks, led by BNP Paribas|
|Documentation Agent and Sustainable Coordinator||BNP Paribas|
|Positive Incentive||Discount or premium on margin indexed on average of ESG scores. One another condition includes introduction of an additional margin adjustment parameter linked to Accor's ASG score|
|Credit Rating Agencies||S&P and Fitch|
|ESG Rating Agencies||Sustainalytics|