Bonds and Loans: Experts predict 40-fold rise in ESG-linked debt as NAB signs off on loan to world’s busiest coal port

A weekly overview of ESG developments for fixed income

National Australia Bank has agreed a A$565m sustainability-linked loan with the Port of Newcastle – the world’s busiest port for coal exports. The loan’s interest rate will vary based on how the borrower performs on scope 1 and 2 emissions – but notably not its indirect emissions (scope 3) – as well as its engagement on modern slavery and the establishment of an Indigenous internship programme. NAB told Australian media that discounts for such loans typically ranged from 0.02% to 0.06%. In February, ANZ bank pulled out of refinancing debt for the port, which exported 160m tonnes of thermal coal in 2020.

Natura & Co, which owns The Body Shop and Avon, among others, has issued what it claims is the biggest sustainability bond in Latin America. The B-Corp sold $1bn in notes linked to two goals: reducing scope 1, 2 and 3 emissions by 13% by 2026, and making a quarter of its packaging recyclable over the same period. The 7-year bond has a 4.125% coupon, paid half-yearly. 

Sustainability-linked loan and bond issuance is expected to smash through the $200bn mark this year – a 40-fold increase since 2017. Unlike sustainability-labelled or green debt, where proceeds must be allocated to credible projects, ‘linked’ instruments permit spending on general corporate activities, but the interest rate is tied to borrower-level improvements on green or sustainability metrics. According to research from S&P Global, such instruments allow companies that don’t have sufficient capital expenditure on sustainability projects to access pools of capital to improve their sustainability. 

Real estate giant ISPT has secured a A$2.8bn sustainability-linked loan, which it claims is Australia’s largest. The interest rate on the loan is linked to improvements in GHG emissions intensity, water consumption, waste reduction and labour certification.

Société du Grand Paris has raised €2bn in green paper to finance the low-carbon expansion of the Paris Metro. The 25-year bond saw a final orderbook of more than €4.7bn from more than 120 investors, with 38% going to French investors followed by Germany/Austria/Switzerland (34%) and southern Europe (13%).

Colombian conglomerate Grupo Argos has signed a $108m sustainability-linked loan with Bancolombia. The interest on the loan will be discounted by up to 1% depending on Grupo Argos’ progress on emissions reductions and increased participation by women in upper management.

German car part manufacturer ZF Friedrichshafen has issued an inaugural $500m green bond to finance its wind power and electric car business. The six-year bond has a yield of 2% and was six times oversubscribed.

Gibson Energy has signed a $750m sustainability-linked revolving credit facility with BMO Financial Group. The 5-year facility introduces an interest rate discount tied to carbon emissions reduction, as well as increases in gender, racial and ethnic diversity in its workforce and on the board.

ArcelorMittal has amended its current $5.5bn revolving credit facility to include KPIs relating to a number of environmental and sustainability metrics, including CO2 intensity of its European operations, and facilities certified by ResponsibleSteel.

Jewellery maker Pandora has signed a €950m sustainability-linked revolving credit facility with a consortium of lenders including Nordea, Danske Bank, UniCredit and BNP Paribas. The facility’s pricing is linked to Pandora’s progress towards becoming carbon neutral by 2025 and its stated goal of using only recycled gold and silver by 2025. 

Wind turbine maker Vestas has signed a €2bn revolving credit facility linked to carbon footprint reduction and workplace safety improvements. The five-year facility has two one-year extension options and replaces Vestas’ previous €1.15bn facility.

Home appliance manufacturer Whirlpool Corporation has issued a $300m sustainability bond. The 10-year bond carries a coupon of 2.4% and proceeds will be used to finance eligible green and social projects including socioeconomic advancement and eco-efficient products. 

Stockholm Exergi, which supplies the Swedish capital with heat, power and cooling, has raised SEK1.2bn in green bonds. The proceeds will support Exergi’s plan to become “climate positive” by 2025, in part by using renewable energy. The issuer’s green bond framework, which was developed with Danske Bank in 2019, has been certified as ‘dark green’ by Cicero.