Perspectives / Sustain / Sustainability-Linked Loans...
Large international companies are quickly learning the benefits of connecting their sustainability performance to their financing, with Dreyfus and NRG each recently announcing debut sustainability-linked loans (SLL) in the US, both structured by BNP Paribas
DID YOU KNOW? The volume of ESG-linked loans in 2019 has already surpassed the $40 billion+ issued worldwide in 2018. |
The innovative approach of SLLs as financing instruments has attracted increasing attention from corporate treasurers and CFOs at leading companies with a focus on sustainability.
One of those firms is NRG Energy, a US power utility leader that is no stranger to sustainability initiatives, with a comprehensive framework that targets a 50% reduction in carbon emissions by 2030. While SLLs are more commonplace with European utilities, NRG's $2.6 billion SLL is only the third such transaction for a US utility to date.
" This type of financing will likely become the new normal in the industry. "In line with NRG's strategic approach to sustainability, the loan's interest rate will be reduced if NRG meets key performance indicators including greenhouse gas emissions and revenue carbon intensity. As with Dreyfus, the KPIs for NRG's loan will be audited by a third party. BNP Paribas acted as sustainability structuring agent for the transaction.
Pierre Veyres, Head of Global Banking Americas and Deputy CEO of CIB Americas
"We are seeing signs of rapid adoption of sustainability-linked loans worldwide, including in the US, which is an evolving market for green and sustainability lending," said Pierre Veyres, Head of Global Banking Americas and Deputy CEO of CIB Americas. "This type of financing will likely become the new normal in the industry."
As global demand for sustainable finance continues to surge, SLLs are expected to make up an increasing portion of the market – highlighting the idea that positive impact financing is good business.