Decarbonising the global economy requires collaboration between multiple sectors and stakeholders, including significant support from finance. The rise of the sustainability-linked loan (SLL) evidences an increasing shift in corporate strategy to embed sustainability into financing, with the market growing 96% between 2018 and 2019 to over €100 billion.
Electricity Supply Board signed a new €1.4bn sustainability-linked loan targeting decarbonisation, marking the first SLL for an Irish utility.
ESB provided a significant boost to the Irish SLL market in February 2020, announcing an inaugural €1.4 billion SLL - the first for an Irish utility. The five-year loan is directly linked to ESB's 2030 Brighter Future strategy, in which it commits to reduce the carbon intensity of its generation output by 40%, and to increase renewable generation output by 170% relative to the 2018 baseline.
Under the key performance indicator (KPI) mechanism, ESB will benefit from an interest reduction if it meets the targets, or will pay a higher interest rate if the KPI targets are missed. This SLL is ESB's second foray into the sustainable finance markets, following on from a debut green bond launched in June 2019, Ireland's first corporate public green bond.
" ESB provided a significant boost to the Irish SLL market in February 2020, announcing an inaugural €1.4bn SLL - the first for an Irish utility. "
Billy Quinlan, Head of Global Banking Ireland at BNP Paribas, said: "We are proud to be working with ESB as they transition towards a low-carbon energy future based on clean, reliable, affordable electricity. This SLL is a great example of how sustainable finance can be effectively deployed to support our clients' efforts to contribute towards climate action, in line with the United Nations Sustainable Development Goals and Principles for Responsible Banking."
Pat Fenlon, Executive Director, Group Finance and Commercial at ESB, said: "The use of green finance, including this sustainability-linked loan and our recent green bond, further demonstrates ESB's commitment to leading the transition to a low-carbon future while addressing the requirements of today's financial markets, which are directing increasing levels of capital into carbon action investments. By having sustainability at the heart of our operations, we can maintain a viable and successful business with the financial strength to invest in this future for all our customers."