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
Federico Cerisoli, Dreyfus Group Chief Financial Officer, said: "As a company, we are committed to fair and sustainable value creation, and we are linking that commitment to our financing. It is also positive that the banking community is increasingly rising to the challenge, through novel financing options." Cerisoli added that the firm plans to use similar sustainability targets as similar RCFs come up for renewal in Asia and EMEA.
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."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.