When agricultural giant Louis Dreyfus recently
announced the renewal of its US $750 million revolving credit facility (RCF),
it also revealed it was including a sustainability-linked pricing mechanism for
the first time. Dreyfus, referred to as the “D” of the ABCD group of big
agricultural commodity merchants, is a leading merchant and processor of
agricultural goods globally. The interest rate of its new sustainability-linked
loan is connected to the firm’s performance against four sustainability
performance targets related to CO2 emissions, electricity consumption, water
usage and solid waste sent to landfill. Meeting these targets each year will
result in a reduction in the interest rate on the loan, with performance audited by a third party to ensure
transparency. BNP Paribas served as sustainability coordinator,
administrative agent and joint lead arranger.
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
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
“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.