LOANLYPLANET

A Refinitiv LPC publication | Covering Green, Sustainable and Positive Incentive Lending Globally | February 2020

GREENSHOOTS Loan investors seek ESG info; Virmani, Associate General Counsel & Executive
Vice President, Public Policy at the LSTA.
LARGEST 5 DEALS to date LSTA’s ESG Diligence
Issuer |Deal Size| Market Questionnaire is first step LOANLY PLANET: In the letter to LSTA members
that accompanied the draft of the ESG Diligence
1. Gestamp Automocion | US$1.4bn| Spain The ESG mindset is gaining traction across capi- Questionnaire, you noted that the impetus for
tal markets offerings and with broader awareness this effort was the increasing number of ESG
2. Ophir-Rochor| €3.9bn| Singapore comes greater demand for information. In late questions buyside lenders were receiving from
3. Gunvor Group | US$725m| Switzerland January, the LSTA published its inaugural ESG their end investors and, in turn, the need to ob-
4. Britvic Soft Drinks Ltd| £$527.9m| UK Diligence Questionnaire, the first step in what tain “reliable” ESG information about companies
is expected to be an ongoing process commen- which has proven difficult. How does the ESG
5. International Seaways | US$90m| US surate with the evolution of ESG considerations Diligence Questionnaire begin to address this
FAST FACTS in the context of company risk profiles.
This was followed in February by the published
concern?
Issuers tapped the loan market with over TESS VIRMANI: In simplest terms, the ques-
results of the European Leveraged Finance As- tionnaire offers investors a streamlined means
US$14bn of green and sustainability-linked sociation’s (ELFA) ESG Investor Survey and the of asking ESG-related questions where one did
issuance in January, down roughly 10% from establishment of a working group to foster the not exist before. There really was not a way for
year ago levels. expansion of ESG investing across the European loan investors to get the information that this
loan and bond markets. questionnaire elicits from private companies.
In late January, ESG filters adopted by Respondents to the ELFA survey included 100 We stepped in to fill a void, to offer some means
a number of CLO investors raised concerns investors of which 90% represented firms that of asking the questions that need to be asked.
manage leveraged syndicated loans and/or high In thinking about the questionnaire, I think
around backing for UK aerospace and yield bond assets. The results of the survey in-
defense company, Cobham Plc’s €1.6bn there are two key points for market participants
dicated “that over 70% of respondents already to remember:
buyout financing. While the company address ESG considerations as part of their in- The first is that we acknowledge that ESG is
does not make any weapons itself, given its vestment process on at least half of their fixed evolving, ESG integration is evolving and that ESG
proximity to certain military supply chains income assets, yet nearly half of respondents do in the loan market will continue to evolve. We put
not believe that they have access to adequate
lenders noted that some investors may together this questionnaire as an important first
information on material ESG issues relevant to step in introducing an ESG disclosure hygiene. But
struggle in what is viewed to be a grey zone make their investment decisions.” we see this very much as a beginning, not the end.
around application of ESG criteria. The deal It is this information gap, which to a large de- We fully expect the future of the questionnaire
was ultimately well received, tightening gree comes down to company disclosures, that to be an iterative process.
pricing and cancelling the bond issue in the the LSTA’s ESG Diligence Questionnaire hopes The second point is that it can be tempting to
to narrow.
process. automatically link in one’s mind the questionnaire
To better understand the background to and with an ESG loan, but that is not necessarily
(FAST FACTS cont’d on p. 4) the hopes for LSTA’s ESG Diligence Questionnaire, the case. This questionnaire is the product of
Loanly Planet was pleased to interview Tess
(LSTA ESG cont’d on p. 2)

IFR’s ESG Financing Briefing

Year over year comparison
IFR’s ESG Financing Briefing is a
subscription service offering daily 1Q19 (US$bn) 1Q20 (US$bn) Percentage change (%)
Global Green & ESG Loan Volume
news, data and analysis on green Total Proceeds (year to date) 8,190.86 5,429.78 -33.7%
and ESG lending from across the Total Proceeds (1Q) 23,123.56
Refinitiv Capital Markets Insight Total Deal Count (year to date) 9 16 77.8%
Source: Refinitiv LPC, Refinitiv

Team. Total Deal Count (1Q) 26 -100.0%

Green Loans (year to date) 368.66 1,328.28 260.3%

To subscribe or learn more, e-mail ESG-Sustainability Linked (year to date) 7,822.20 4,911.50 -37.2%
[email protected] Schuldschein (year to date) 0.00 0.00 0.0%

Global Green & ESG Bond Volume

Total Proceeds (year to date) 16.01 14.40 -10.0%
Total Proceeds (1Q) 38.1
Total Deal Count (year to date) 44 42 -4.5%
Total Deal Count (1Q) 114

A Refinitiv LPC Publication © 2020 Any copying, redistribution (including electronic forwarding) or republication of Refinitiv LPC and
Refinitiv publications, or their content is strictly prohibited. For more info email at [email protected].
COVER STORY
(LSTA ESG cont’d from p. 1)
requests from our buyside membership caused LSTA’s ESG Diligence Questionnaire
by the push for ESG integration (that is happening The questionnaire comes in the form of eight questions “designed to solicit a baseline of ESG informa-
across portfolios) from asset owners. So while tion about the borrower’s business which would be completed during the due diligence phase of a new
the objective of the questionnaire is focused loan origination or refinancing.” The questions themselves are grouped around four general categories
very much on getting information in the hands (additional information is provided in LSTA FAQs documentation as well as questionnaire itself):
of investors, it is not necessarily from our point
of view, with an eye to encouraging a new ESG • ESG Governance: which prioritizes insight to a company’s understanding ESG factors specific to its
product or loan fund. That being said, having business, its commitment and approach to ESG matters and the seniority of individuals making ESG-re-
the right information is a key ingredient in the lated decisions within the organization.
development of future ESG products the market • Relevant ESG Frameworks: which provides insight to any recognized ESG frameworks or standards
decides it wants or needs. which the borrowers used to inform their understanding and views of ESG standards for their specific
business.
LP: How do you think it will help the market • Relevant ESG Factors: which requests borrowers to identify ESG objectives as they pertain to their
obtain reliable ESG information and is it important industry but with greater specificity which includes individual aspects of Environmental (E), Social (S) and
at this stage to have consistency? Or is the ob- Governance (G) identified as relevant to their business, how each of these factors are being addressed
jective to get corporations to report on a regular by the borrowers’ corporate practices and how performance initiatives undertaken to address each of
basis as part of their regular credit undertaking? the identified factors is measured over time.
TV: It’s a great question. I think there are a • Breakdown of Company Revenue: which poses the question of what if any proportion of borrowers’
couple of pieces there, so I am going to break it revenues are derived from specific activities. This information is requested as an inclusionary practice,
down into a few smaller ones. The first is that the not as an impetus to make a value judgement on the nature of these activities but as a means of pro-
questionnaire can only help lenders get reliable viding visibility to asset managers so that they can respond appropriately to bespoke mandates that
ESG information if it is completed. We wanted they must meet.
to present the questionnaire as simply as we
could so, for instance, we decided having a single
questionnaire that could apply to a company in After record quarter in 4Q19,
any industry was more user-friendly than having global green and ESG lending off to strong 2020
industry-specific questionnaires or modules. That
Global Green & ESG−linked volume (US$bn)

$140
then impacts the general drafting approach be-
cause the questions need to be broadly applicable $120
even though the responses will be industry- and
business-specific. We also believed it was import- $100

Source: Refinitiv LPC

ant to ensure the questionnaire recognized that
for many borrowers in the loan market it is still $80

early days for them in terms of conducting ESG

$60
reviews of their businesses and incorporating ESG
into their business planning. For those borrowers, $40
we wanted to draft the questionnaire so that
there was still an opportunity for them to start $20

the ESG dialogue with their lenders.

They will hopefully be able to fully complete $0

1Q19 to date

1Q20 to date
1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

the questionnaire over time. You will see that 4Q19

the questionnaire asks about intentions and
concepts, the preliminary discussions which may Green bonds ESG Loans Green Loans
not have been formalized into a policy yet, but
*Includes Schuldschein
it is a place to start.
The second piece of the question is around
consistency. There is a lot of discussion about the
need for standardization and consistency in ESG Lenders tap loan mart for nearly US$8bn in global green and
reporting. Ultimately, this is true, but currently
there are so many reporting frameworks out
ESG loan volume YTD
Regional Green & ESG−linked volume (US$bn)

there. That fragmentation makes it difficult to lock

$5.0 80%
borrowers into a required reporting framework,
71%
so the questionnaire doesn’t do that. You see that $4.5
70%
Source: Refinitiv LPC

the borrower identifies for itself the specific E, $4.0

60%
S, and G factors that are relevant to its business.
Pro rata Share (%)

$3.5
We offer the SASB Materiality Map as a point of $3.0
50%
reference, but we thought it is more encouraging
to allow borrowers to respond through the lens $2.5 40%

with which they have been looking at ESG. How- $2.0

30%
ever, the questionnaire does ask what framework $1.5 20%
informs their decisions. Currently, there is good $1.0
20%

work being done to try to align many of the ESG 7% 10%

$0.5
reporting frameworks. As that process continues 2%
and there is more alignment, we may see that $0.0 0%
EMEA Americas APAC Japan
reflected in future iterations of the questionnaire.
Volume Pro rata share
*Includes Schuldschein

(LSTA ESG cont’d on p. 4)

LOANLYPLANET © | Page 2
 GREEN LENDING ATLAS
Canada: WSP Global Iceland: Marel signed a €700m RC Sweden: Wallenstam signed a Germany: Telefonica Deutschland agreed
closed a US$1.2bn that includes a sustainability-linked US$258m green loan from the to a €450m loan from the European
sustainability-linked pricing mechanism. European Investment Bank Investment Bank to finance
syndicated credit facility. to support the construcon the rollout of its 5G network.
of “nearly-zero-energy-buildings”.

Russia:
NLMK is in talks for another sustainability-linked loan,
following the recent amendment of a €250m RC
for one of its European subsidiaries.

US: The LSTA’s ESG

quesonnaire released
Feb. 3 is gradually UK: Japan: Ryobi Ltd is raising
chipping away at Great Portland ¥13bn (US$119m)
barriers to Estates signed through a debut green loan.
transparency in the a £450m RC
US$1.2trn US leveraged linked to
loan market. ESG targets.

Myanmar: Shwe Taung

Italy: Group obtained a US$44m
Fondo Diamond green loan, the first
Core agreed to an sustainability-linked financing
€85m green term for a Myanmar-based corporate.
loan secured on
a LEED Goldcerficated
property in Milan.

LEAGUE TABLES
2019 Global Green and ESG-linked Global Top Tier Lender League Table (by Deal Count)
Deal Volume
Rank Lender Parent Count (m)(USD)
1 BNP Paribas SA 92 10,176.28
2 ING Group 65 6,175.44
3 Credit Agricole Corporate & Investment Bank SA 63 7,480.43
4 Banco Santander SA 60 6,602.31
5 Societe Generale SA 53 5,911.05
6 HSBC Banking Group 50 5,318.07
7 Banco Bilbao Vizcaya Argentaria SA [BBVA] 46 5,480.47
8 UniCredit 36 4,481.82
9 Citi 35 5,752.59
10 Natixis SA 33 3,669.92
Source: Refinitiv LPC

2019 Global Green and ESG-linked All Participant Level League Table (by Deal count)
Total Volume
Rank Lender Parent Count (m)(USD)
1 BNP Paribas SA 96 109,965.73
2 ING Group 71 72,383.02
3 Credit Agricole Corporate & Investment Bank SA 67 100,640.32
4 Banco Santander SA 61 72,546.67
5 HSBC Banking Group 57 77,327.72
6 Societe Generale SA 55 76,531.65
7 Banco Bilbao Vizcaya Argentaria SA [BBVA] 53 55,407.40
8 Mitsubishi UFJ Financial Group Inc 41 52,892.45
9 Citi 40 71,844.65
10 UniCredit 39 52,190.63
Source: Refinitiv LPC

LOANLYPLANET © | Page 3
COVER STORY IN THE NEWS
(LSTA ESG cont’d from p. 2)
All change for ESG loans rating methodology tainability-linked loans, as Austrian steelmaker
LP: What sort of feedback have you gotten Companies and banks are changing some sus- Voestalpine did in October.
from the market? tainability-linked loans to accommodate changes As the SLL market is still only three years old,
TV: The feedback has been all positive. We have by ESG ratings firm Sustainalytics, highlighting existing deals have not yet been refinanced,
a lot of interest from members. They are thrilled the complexity of the rapidly developing market although that is expected to start next year.
the LSTA has gotten involved in this and there and lenders’ exposure to methodologies under-
is a centralized push from LSTA on this front. I pinning the deals. HOLY GRAIL?
think there was also some initial uncertainty over SLLs are booming as companies rush to show Changing ratings and methodologies is bringing
how automatically this questionnaire would be their environmental credentials. Pricing of the a new level of monitoring to syndicated loans,
used. Completing the questionnaire is voluntary loans is linked to firms’ ability to hit sustainability as sustainability finance continues to evolve
and will be on a transaction by transaction basis. targets, which can include ESG ratings, as well as at breakneck speed, reflecting growing public
The ramp up will take some considerable effort metrics that firms set themselves. awareness of the climate crisis.
by members, because investors will need to About US$135bn of SLLs were completed in Methodology changes reflect changing percep-
make it clear to arrangers and borrowers that 2019, according to LPC data, as more companies tion of risk, as what might be considered green
this is wanted, that this is important to them. chose to set key performance indicators on loans or sustainable today may be less so tomorrow,
Arrangers and borrowers need to understand in the hope of achieving a small pricing discount and can also be driven by consolidation as ESG
that these types of requests are not going to go for hitting ESG goals. firms fight off increasing competition from credit
away. As a second point, if borrowers can see Deals that use ESG ratings to set pricing are ratings agencies.
that there are many institutions supporting this affected by any changes in methodology by Sustainalytics did its first revision of its new ESG
questionnaire they will see that by completing it, ratings firms during the life of a loan, as this can risk ratings in November 2019, and tightened
it will be more efficient for them than answering change the company’s ESG rating, and, crucially, its criteria on bribery and corruption. It is also
several different questionnaires or ad hoc ESG its pricing. recommending that banks add a “sanity check”
questions from different investors. “Changing methodologies could create a to loans every two years to check that metrics
potential difficulty for the sustainability-linked are still fit for purpose.
LP: What is the next priority for the LSTA in loans market,” law firm Linklaters said in a report. The shift also highlights attempts to harmonise
this space? ESG ratings, which often deliver wildly different
TV: We are very focused on education and IS 10 GOOD? results, drawing criticism from investors. The
getting the questionnaire on market participants’ Sustainalytics is one of several specialist ESG fast-moving sector is unregulated, unlike credit
radar screens and getting it used. We will be ratings agencies that offer independent opinions ratings agencies, and is also facing calls to stan-
monitoring how it is used and what feedback we and score companies’ sustainability. The firm dardise methodologies.
get on the questions and how they are asked. changed its methodology in 2018 and introduced “ESG ratings are not the holy grail, but they’re
We will be updating it and refreshing it and the ESG risk rating to reflect investors’ growing the best approximation at the moment of the
making it as user-friendly as possible. Now that appetite for risk management. question of when is a company sustainable or
conversations have started, we can think about It switched to giving a lower score for low risk, not. It’s not the final word, but it’s the best that
how we want to refine the questionnaire and after previously giving higher scores to companies we’ve got at the moment,” Mees said. – TW
take it forward. that performed well on about 120 environmental,
social and governance metrics. Sustainalytics will
continue to run both methodologies until 2026
to give the market time to adapt. Credit investors catching up on ESG

FAST FACTS Banks using the legacy methodology are oper-

ating on the basis that 100 is good, while banks
Credit investors are increasingly incorporating
environmental, social and governance (ESG)
(cont’d from p. 1) that have switched to the new ESG risk rating criteria into their investment processes, but in-
reports are operating on the basis that 10 is good. sufficient data metrics for high-yield issuers and
The changes are causing some confusion as they leveraged loan borrowers remain a challenge.
In a testament to the increasing
filter through the market, but banks are positive According to a survey of credit managers
power of investors in the ESG space, as they identify material issues for issuers and conducted by European leveraged Finance As-
Norway’s US$1trn sovereign wealth fund, sectors that give investors a better idea of risk sociation (ELFA) in November 2019, around 72%
the larg-est in the world, indicated that it and allow banks to set tighter KPIs. of respondents address ESG considerations as
is able to once again invest in British “Ratings changes are positive as they’re part of their investment process on at least half
power firm, Drax Group, following the tracking more and better information. If you of their fixed income assets as they are facing
work in sustainability, you know the bar will be increased investor pressure.
firm’s reduction in the use of coal in raised gradually,” said Roland Mees, director of Over three-quarters of respondents revealed
producing electricity. The company was sustainable finance at ING. they usually get ESG questions from their investor
excluded from the fund in 2015 after The change is, however, creating an administra- base, with over one-third stating that ESG factors
Norway passed a law ban-ning the fund’s tive headache for lenders. Companies taking out are mentioned in nearly every investor meeting,
investment in companies that generated new loans will use the new methodology. They the survey said.
include Russian steel company NLMK. But com- Over half of respondents reported that they
more than 30% of their revenues or panies with existing deals are expected to make need to meet end-investor requirements for
activities from coal. Over the last four the change by amending their loan documents. industry/company exclusions based on ESG
years has made meaningful move to “If the metric is no longer relevant, you have to concerns.
biomass as fuel. revise documents” a senior banker said. Other respondents said that integrating ESG
Norway’s wealth fund was the first major Amending loans requires consent from the criteria enabled a more holistic credit research
borrower. Most syndicated loan documents also process.
fund to ban coal companies. Its divest-
require unanimous lender consent for changes Respondents indicated that improved corpo-
ments in 2015 led other long-term inves- that impact the margin. rate data disclosure could help accelerate ESG
tors to adopt similar guidelines, including The amendments are expected to happen either integration and make offering processes more
German insurer Allianz. when one-year extension options are exercised efficient.
on deals with 5+1+1 maturities, or if companies ELFA is initiating an engagement programme
choose to refinance non-ESG deals into sus- (NEWS cont’d on p. 5)

LOANLYPLANET © | Page 4
IN THE NEWS
(NEWS cont’d from p. 4)
for 2020 with key stakeholders to develop a There is also some potential financial ad- After this latest financing, Bromford has now
standard set of material ESG disclosure topics vantage for borrowers. NLMK’s sustainability raised more than £1bn in new funding or the
which issuers and borrowers could be expected performance will be assessed by Sustainalytics, refinancing of legacy debt in under two years.
to report publicly. and a positive ESG rating change will lower In January, S&P Global reaffirmed Bromford’s
About 100 investors from over 55 originations borrowing costs. A+ credit rating, reflecting its strong liquidity
participated the survey, with approximately 90% Aluminium giant Rusal’s US$1.085bn sustain- position.
representing firms managing high yield bonds or ability-linked pre-export financing signed in Bromford owns and manages around 44,000
syndicated leveraged loans. – PH October also has its margin linked to certain key homes spread across central and south west
performance indicators. That could lower pricing England. – AR
by up to 25bp, according to a third banker.
But it’s not just for economic reasons that Rus-
NLMK eyes sustainability-linked loan sian corporates are looking to green financing.
Russian steel group NLMK is in talks for another The global nature of many large Russia exporters Great Portland agrees £450m RC
sustainability-linked loan, following the recent means they are facing the same pressures as other UK property investment and development
amendment of a €250m revolving credit facility global corporates to increase their focus on ESG. firm Great Portland Estates (GPE) has signed
for one of its European subsidiaries that linked “Many Russian companies are very integrated a £450m revolving credit facility (RCF) with a
pricing to sustainability performance. into the global economy. Some have western margin linked to the company’s environmental,
“NLMK tested a sustainability-linked loan with equity investors pushing for this. It is a PR exer- social and corporate governance (ESG) targets.
the amendment for one of its western subsid- cise – like other global corporates they are under It is the first sustainability-linked loan to be
iaries and now its parent in Russia has started pressure to show their social responsibility.” said issued by a UK real estate investment trust.
talks with banks for a direct ESG-linked loan,” the first banker. “Real economic consequences Fully available for general corporate purposes,
said one banker. will come, but that could be 15 years down the the facility is an amendment and extension of
NLMK did not respond to a request for com- road.” – SB GPE’s existing £450m RCF originally signed in
ment. October 2018.
The new loan is part of the increasing push by The unsecured RCF is for an initial five years
Russian corporates and their lenders towards with options to extend by a further two years.
sustainability-linked loans. Bromford Housing nets £50m RC The initial margin on the facility is 90bp over
ING was sustainability coordinator on the Housing association Bromford Housing is the Libor, down from the 92.5bp paid on the exist-
€250m amendment, while UniCredit was agent. latest British housing provider to agree a sustain- ing RCF.
Last October, UniCredit launched its newly ability-linked loan (SLL). The margin decreases or increases by up to
created sustainable finance advisory team, led The £50m 10-year revolving credit facility from 2.5bp annually depending on GPE’s performance
by Antonio Keglevich. NatWest includes a margin that will ratchet down on three ESG-linked key performance indicators
The team guides clients on brown-to-green if Bromford successfully meets pre-agreed envi- (KPIs).
transition strategies while supporting the origi- ronmental targets related to the energy efficiency The KPI’s include annual pre-agreed targets
nation of ESG finance mandates with corporates of its existing homes. based on decarbonisation of existing buildings
and financials. “We aim to reduce our impact on the environ- by reducing portfolio energy intensity by 40% by
UniCredit is one of a small number of European ment and combat the effects of fuel poverty, 2030; build net zero carbon new buildings from
banks, including Natixis, ING, Societe Generale, putting more money back into the pockets of our 2030 by reducing the embodied carbon of new
Credit Agricole and Raiffeisen Bank International, customers,” Imran Mubeen, Bromford’s head of build developments and major refurbishments;
that can still lend to Russian corporates following treasury, said. and providing better quality urban greening
sanctions imposed in 2014 after Russia annexed “We’ve also pro-actively sought to bring in measures by increasing the biodiversity net gain
Crimea. new funding at sector leading rates to optimise across GPE’s portfolio.
our loan book.” The targets will help accelerate the decarboni-
WEST TO EAST Any savings made on the financing will be sation of the company’s business will support
For these banks, the growth of ESG-linked reinvested into initiatives like Bromford’s in- continued behavioural change within the group
loans into Russia is an expansion of what they house YouCan Foundation which awards grants and across its supply chain, GPE said.
are already offering clients in western Europe. to customers and local initiatives to support “This financing further shows our drive to inte-
“This is very much coming from western Europe communities. grate our sustainability ambitions right across the
where it has suddenly exploded. I am working “The challenge is bringing these themes togeth- business and to work with all our stakeholders to
on three more ESG-linked loans in Russia,” said er in a coherent framework and capturing high create behavioural change as we move closer to
the banker. quality data to support specific targets attached decarbonising our business,” Janine Cole, GPE’s
It is also a way for some of these banks – in to loans,” Mubeen added. director of sustainability and community, said.
particular those that have been banned by their “We look forward to issuing more ESG linked From May 2021, GPE will measure performance
credit committees from lending to coal compa- debt in the near future; creating increasing syn- against each KPI annually.
nies for environmental reasons - to expand their ergy and a joined-up approach across our busi- All margin adjustments will be given by GPE to
financing offerings to Russian borrowers. ness activity to reduce the cost of new funding registered charities focused on environmental
“Some lenders that have stopped financing and bringing tangible benefits to the 100,000 initiatives.
coal businesses in the conventional way could customers living in our homes.” Participating banks are Santander, NatWest,
begin to finance using an ESG product,” said a There is a growing focus on environmental, Wells Fargo, Lloyds Bank and Bank of China.
second banker. social and governance (ESG) factors from inves- Santander is sustainability coordinator. – AR
It is also a way for Russian borrowers to keep tors, with a number of landlords such as London
as much international liquidity on the table as & Quadrant (L&Q), Optivo and Peabody Trust
possible. recently linking facilities to social goals such as
“If they don’t go green they might lose some employment and childcare. Frasers Australian unit breaks new ground
borrowing capacity or at least reduce their pool At the end of January, Clarion Housing Group Frasers Property Australia Pty Ltd has set up
of lenders. ESG might be an instrument to enlarge said that it had secured a £100m SLL from BNP a sustainable finance framework, the first of its
their banking group or access new products or Paribas. Pricing on that five-year financing was kind for a real estate company from Asia Pacific,
pockets of money,” said the second banker. linked to employment. according to a press release on Monday.
(NEWS cont’d on p. 6)

LOANLYPLANET © | Page 5
IN THE NEWS
(NEWS cont’d from p. 5) tankers. It eventually raised US$125m, less than A report on the bond by second-party opinion
The company, a unit of Singapore-listed Frasers the US$150m-$200m the company was initially provider Cicero said each shuttle tanker features
Property Ltd, set up the framework with plans aiming for. annual carbon dioxide savings of 47% compared
to become carbon neutral in development and The bookbuilding process was also sluggish with other tankers operating in the North Sea.
operation by 2028. with the bond pricing at 650bp over three-month Bermuda-headquartered Teekay’s bond was
ANZ Bank, Barclays Bank and OCBC are joint Libor, equivalent to a yield of about 8.50% in rated light green by Cicero, indicating ‘good’
sustainability coordinators for the framework, fixed-rate terms. governance procedures.
which defines an entire portfolio as sustainable Most green bonds only bind the company to “At the time of the second opinion process for
assets using the Global Real Estate Sustainability hold onto a certain pool of environmental projects Teekay’s green bond framework, we inquired
Benchmark (GRESB) ratings. or assets throughout the lifetime of a bond, and about their recycling policies,” said Christa Clapp,
It provides overarching criteria and guidelines those assets are often only a small subset of the research director of climate finance at Cicero. “As
for the company to enter into sustainable fi- borrower’s balance sheet. we noted in our opinion, the issuer informed us
nance transactions, including but not limited “You could in theory have 90% polluting ac- that vessels will sail under the Norwegian flag,
to, green, sustainability or sustainability-linked tivities or assets and still issue a green bond for hence the ships will be recycled according to the
bonds and loans. the 10% activities that are carbon neutral,” said EU Ship Recycling Standard.”
Funds raised under this framework can be used an ESG banker. Cicero is closely monitoring the situation.
to finance a green portfolio with minimum 4 Star It also means that ESG-related controversies “We will follow along as further information
GRESB rating. do not tend to directly impact the functioning is released related to the investigation.” - ED
Frasers Property Australia may potentially link of a green bond, once issued.
commercial incentives with its sustainability “The use of proceeds arguments shows how a
targets, and aims to achieve a 5-Star rating from lot of the green bond debate totally misses the
GRESB for its new developments and at least a point,” said a green bond analyst.
4-Star rating for its existing portfolio. “Use of proceeds does not mean an investor is Naturgy nets €600m green loan
Frasers Property has been quite active in absolved from what the company does overall.” Naturgy Renovables, the renewable energy
green financing initiatives. Last September, its arm of Spanish utility Naturgy Energy Group,
unit, Frasers Property Treasury Pte Ltd, raised INDIRECT ISSUE has agreed a €600m green loan, legal adviser to
a A$750m five-year term loan that includes a The investigation into Teekay’s activities is the company Watson Farley and Williams, said.
A$500m green portion. unlikely to be a direct issue for its green bond The financing comprises €500m of seven-year
ANZ, Barclays, First Abu Dhabi Bank Singapore investors but it will make ESG-focused investors term loans and a €100m five-year revolving credit
branch, Mizuho Bank, OCBC Bank and Scotiabank think twice about buying future green bonds facility, according to Refinitiv LPC data.
were the mandated lead arrangers, bookrunners from the company, said a US-based green bond BBVA and Caixabank coordinated the financing
and underwriters of the bullet transaction. Bar- investor and the ESG banker. as bookrunners and green agents.
clays was the sole Green coordinator of the deal. “It doesn’t make the company look very good Garrigues Abogados advised the banks.
It marked the group’s fifth green loan in a from a ‘sustainability’ standpoint,” said the Naturgy, previously Gas Natural Fenosa, was
year since its maiden S$1.2bn (then US$880m) investor. formed in 2008 from Gas Natural’s acquisition
five-year green financing for Fraser Property in Investors increasingly want green bonds to be of Union Fenosa. The company’s core business is
September 2018. That was the first syndicated consistent with a company’s overall sustainability in the regulated and liberated gas and electricity
secured transaction of the kind from South-East strategy, said the ESG banker. markets.
Asia. And many sustainability investors have broader In 2017, the company agreed a €330m sustain-
Other similar loans included a A$170m green controversy or ESG screening measures when ability-linked loan with ING Wholesale Banking.
financing for Frasers Logistics & Industrial Trust they consider buying green bonds. That four-year financing had a one-year ex-
last June and a A$600m five-year green facility Still, it highlights a lot of the frustrations some tension option and a margin partially linked to
for Frasers Property Australia Pty Ltd in April, have with the green bond sector, where there is the company’s ESG performance as assessed by
the first such Aussie dollar-denominated loan no universal standard or broader accountability. independent rating agency Sustainalytics. – AR
Listed on the main board of Singapore’s stock
exchange, Frasers Property owns, develops and THE CASE AGAINST
manages a diverse portfolio of properties. – MI The majority of the world’s ageing ships are
broken up on beaches in Bangladesh, Pakistan More details on Britvic
and India - often in unsafe conditions, say cam- More details have emerged on British soft drinks
paigners. company Britvic’s £400m sustainability-linked
Norway launches probe into Teekay Teekay Shipping Norway is suspected of ille- revolving credit facility (RCF).
Teekay Shuttle Tankers is under investigation gally sending a shuttle tanker to Alang, India, to The financing, which replaced Britvic’s existing
by Norway’s environmental crimes unit just be scrapped in violation of Norwegian and EU £400m RCF that was due to mature in 2021, has
months after the ship operator struggled to raise regulations concerning waste exports. a five-year maturity with two one-year extension
a controversial green bond to help finance the European courts, using tougher regulations, options.
purchase of energy-efficient oil tankers. have increasingly been fining shipping companies Margins on the facility are linked to three of
The National Authority for Investigation and for hazardous waste disposal. Britvic’s annual key performance targets including
Prosecution of Economic and Environmental Norwegian police have not yet reached a 50% of all plastic bottles in Great Britain and
Crime (Okokrim) in Norway last week raided the conclusion over whether Teekay’s vessel can be Ireland to be made of recycled plastic; a 50%
Stavanger offices of Teekay Offshore on suspicion considered as waste before sailing from Norway. reduction in carbon emissions when compared to
of illegally disposing of a shuttle tanker in south “We want to be open and transparent about 2017; and 75% of Britvic’s global drinks portfolio
Asian scrapyards. our ship recycling practices, as we always have to be either low or no sugar.
The incident highlights the conflicts facing been,” said a Teekay Offshore spokesperson in an Under the mechanism, if Britvic meets two or
green investors who are asked to back a strategy emailed statement to IFR. “At the same time, we three of its sustainability targets the margin will
to reduce pollution from a company working in need to acknowledge the ongoing investigation decrease and Britvic will pay any saving to charity.
the oil and gas industry. and respect the related processes.” If Britvic meets one target the margin will
Teekay got a cool response from investors for a Teekay’s green bond will part-finance four remain unchanged.
five-year floater in October with the deal dogged new energy-efficient shuttle tankers - specialist If Britvic fails to meet any of the three sustain-
by questions over whether the green label was vessels that transport oil from offshore fields ability targets, the margin will increase and the
suitable for a bond that would help finance oil instead of pipelines. lenders will pay the difference to charity. – AR
LOANLYPLANET © | Page 6
 To sign up for Refinitiv LPC’s
LOANLYPLANET
contact
Americas: [email protected]
EMEA: [email protected]
Asia Pacific: [email protected]

www.loanpricing.com
IFR’s
ESG Financing Briefing

IFR’s ESG Financing Briefing is a subscription

service offering daily news, data and analysis
on green and ESG lending from across the
Refinitiv Capital Markets Insight Team.

To subscribe or learn more, e-mail

[email protected]