Corporates are acknowledging that they can access financing more easily by demonstrating similar sustainable KPIs and policies. At a EuroFinance event for corporate treasures and company CFOs in September 2020, publishing and education group Pearson shared how they had seen the benefits of following sustainability targets and KPIs. James Kelly, Group Treasurer shared that an ESG wrapper on a product could produce a win-win situation for both the investor and the planet. He added that sometimes being innovative can also reduce the cost of capital and projects that might formerly have been marginal become more attractive.
The win-win of sustainable finance and applying good ESG standards doesn’t necessarily mean corporates taking a financial hit. Kelly provided an insight into how Pearson embarked on its own sustainability journey. He said this had initially included ESG KPIs in its revolving credit facilities so that the ESG element “wasn’t too intimidating”. Pearson had streamlined itself as a pure-play education company and repaid its debt. Over the summer it returned to the capital markets for the first time in four years with a £350m social bond, whose proceeds will be used for online learning targeted at children from less privileged backgrounds.
The company recently issued a social bond, which was more than nine times oversubscribed. Kelly said that while the company has further to go in its sustainable finance journey, the “buy-in we got internally and from investors” for its recent social bond in a market affected by the pandemic, was very encouraging – and good news at a time when few of the headlines are positive.
Exploring the notion that sustainable finance rewards sustainable business practices, flow also reported how in November 2019 Germany’s Continental found innovative ways to leverage sustainability components for a new €4bn credit line arranged syndicated to 27 relationship banks aligned to agreed sustainability performance. In Supporting clean mobility, Clarissa Dann reflects on Continental’s investment in greener mobility – including innovating through electric drive controls – and the financing it structured to make this possible.
Head of Finance and Treasury Stefan Scholz explained: “By combining sustainability improvements with our new credit line, we have found an innovative way in corporate finance to further advance Continental’s sustainability strategy.” This includes, for example, procuring electricity externally from renewable sources.
In another development, Cologne-based speciality chemicals company Lanxess signed a €1bn revolving credit linked to sustainable conditions. The facility is co-ordinated by Deutsche Bank and Unicredit and depends, among various features, on the successful reduction of its greenhouse gas emissions and an increase in the proportion of women on the top three management levels. The facility was announced one month after the company said it would go climate neutral and eliminate its greenhouse gas emissions of currently around 3.2 million metric tons of CO2 by 2040. “With the 'sustainable' revolving credit facility, we are also underlining our commitment to achieving our ambitious climate targets,” said CFO Michael Pontzen in a press release6.