LOANLYPLANET

A Refinitiv LPC publication | Covering Green, Sustainable and Positive Incentive Lending Globally | September 2019

GREENSHOOTS ESG gains traction and investment process. This has supported a virtuous
circle of regulatory reinforcement.
LARGEST 10 DEALS to date consistency in market In 2015, France became the first country to
by Maria C. Dikeos introduce mandatory environmental reporting
Issuer |Deal Size| Market Growing interest in green and environmental, for institutional investors. As of 2018, the US
1. Carrefour| €3.9bn| France social and governance (ESG), or sustainabili- Department of Labor’s ERISA ruling permits
2. Prologis | US$3.5bn| US ty-linked lending and investment, continues fiduciaries to weigh ESG factors in investment
3. Suez Environnement| €2.5bn|France to drive decisions in 2019. To date, there has decisions. More recently, in March, the European
been US$110.6bn in green bond issuance, a Parliament agreed to language laying out the
4. HCP Inc.| US$2.5bn| US fiduciary responsibility of financial advisors and
36% increase over the same time last year. Over
5. Solvay | €2.0bn| Belgium US$80bn in green and sustainability-linked loan investors to disclose ESG considerations in their
6. COFCO Int’l| US$2.3bn| Switzerland volume has been announced this year, nearly investment decision, in addition to providing
7. Cellnex Telecom| €1.95bn| Spain two times year-ago levels. guidance on how to communicate information
What does this mean in measurable terms in the about their respective inclusion of ESG positive
8. SSE Plc | £1.3bn| UK opportunities.
context of corporate behavior, investor choices
9. Acciona| €1.7bn| Spain and the trickier, morally ambiguous realm of Market expectations have come to include full
10. Merlin Properties | €1.55bn| Spain global ESG? Are the markets moving toward the and transparent access to ESG documents, align-
application of a consistent filter for evaluating ment of underlying metrics as well as peer-to-
FAST FACTS issuers and potentially deals? peer comparisons to measure ESG performance
Over US$80bn in green and sustain- across industries and individual corporate names.
FRAMING ESG METRICS Increasingly the results – in the form of the ESG
ability-linked loan issuance has been scores – are consumed not only by ESG experts
Currently, the concept of ESG as a requirement
announced this year; 63% has been or even cornerstone of lender and/or investor but also by non-experts including the lender and
originated out of EMEA, 21% with the decision-making is evolving with market con- investor communities. The value of ESG content
Americas and 13% in Asia Pacific (ex. stituents applying different criteria based on and metrics is broadened beyond that of a simple,
industry, corporate entity and deal purpose. ethical screening of an issuer or industry to that
Japan). of an analytical tool.
What has become more standardized, howev-
A £75m bilateral sustainability-linked er, is the notion of corporate reporting of ESG
objectives, progress against those objectives, REAL WORLD EXAMPLE: AUTO SECTOR
RC for Peabody Trust was completed in and increasingly, how these results may serve as The relevance of ESG valuations is arguably
August. Peabody will benefit from a low- key indicators of business operations, potential playing out real time in the US automotive sector
er interest rate margin on the loan if it market volatility and earnings risks in the context as car makers and several states, led by California,
delivers agreed ESG metrics. Target levels of corporate valuations. work out a deal regarding emissions standards
According to the CFA Institute ESG Survey, over amid the Trump administration’s efforts to roll
will increase over the life of the loan. 70% of investment professionals globally take back auto emissions plans implemented by the
A £50m bilateral sustainability-linked ESG matters into consideration as part of their (STORY cont’d on p. 2)

revolver for Optivo was also completed Over US$84bn in global green and ESG loan volume
in August. The revolver comes as part
of a larger £200m deal. The company
announced YTD 2019
will benefit from a lower interest rate
Regional Green & ESG-linked volume (US$bn)

$60 70%
65%
if it delivers unemployed residents into 60%
work or training.
$50

ESG & Green Loans

50%
Pro rata Share (%)
Source: Refinitiv

$40

40%
Now available in Dealscan. $30
1. Search Market Segments under Tranche 30%

2. Select ESG, Green Loan, or both $20 21%

20%

3. Add them to your list of criteria 13%

$10
10%
Contact us for more information: 1%

Americas: [email protected] $0 0%
EMEA Americas APAC Japan

EMEA: [email protected] Volume Pro rata share

Asia Pacific: [email protected]

A Refinitiv LPC Publication © 2019 Any copying, redistribution (including electronic forwarding) or republication of Refinitiv LPC and Refinitiv
publications, or their content is strictly prohibited. For more info email @ [email protected].
COVER STORY
ESG COMBINED SCORE

ESG SCORE ESG CONTROVERSIES SCORE

ENVIRONMENTAL SOCIAL GOVERNANCE ESG CONTROVERSY

• RESOURCE USE • WORKFORCE • MANAGEMENT • CONTROVERSIES ACROSS

• EMISSIONS • HUMAN RIGHTS • SHAREHOLDERS ALL 10 CATEGORIES ARE
• INNOVATION • COMMUNITY • CSR STRATEGY AGGREGATED IN ONE
• PRODUCT RESPONSIBILITY CATEGORY SCORE

Amid global interdependence and heightened awareness of environmental risks as well as social and governance concerns, ESG metrics
have come to the forefront of corporate valuations. Indeed, for many global investors and consumers ESG metrics have become key indi-
cators of potential future market volatility, earnings risks and business operations. According to the CFA Institute ESG Survey, over 70% of
investment professionals globally take ESG matters into consideration as part of their investment process. This, in turn, in many cases, has
supported a virtuous circle of regulatory reinforcement. In 2015, France became the first country to introduce mandatory environmental
reporting for institutional investors. As of 2018, the US Department of Labor’s ERISA ruling factors in investment decisions. Against this
backdrop, full transparency to source ESG documents, alignment of underlying metrics as well as peer to peer comparisons have come
together to frame ESG performance based on scoring.

ESG Scores corporate behavior.

95 Nevertheless, there is not only increased scru-
tiny of assets and issuers based on ESG criteria
90
but also greater investor demand for sustain-
85
ability-linked assets. This creates opportunities
as well innovation in the ESG market.
In September, Italian utility firm Enel issued the
Source: Refinitiv
ESG Score

80

first ESG-linked bond tied to the United Nations’

75 Sustainable Development goals. In contrast to
the well-entrenched green bond market, in
70
which proceeds from issues are tied to specific
65
projects or initiatives, the Enel offering raises
funding for general corporate purposes. The
60 company not only identified four sustainable
2013 2014 2015 2016 2017 2018 development goals, but worked with the United
Bayerische Motoren Werke Toyota Motor Corp National Global Compact on the €1.5bn deal
Volkswagen AG Ford Motor Co securing roughly €4bn in commitments, with
“significant participation” from ESG investors
Daimler AG Honda Motor Co Ltd
via the retail market.
(STORY cont’d from p. 1)
Agency in 3Q15, but up from 2016 results (64.10). This reinforces the relevance of sustainabil-
Obama administration. Setting aside the political Why does this matter? It comes back to ity-linked loans, which represent nearly 70%
components of this case, the ESG implications accountability, specificity and, ultimately, the of total green and ESG-linked volume. More
cannot be understated. virtuous circle of consumer demand for re- importantly, it spurs greater awareness around
Four major auto makers – Ford Motor Co, Hon- sponsible and transparent business practices, ESG considerations when it comes to investment.
da Motor Co, Volkswagen AG and BMW – have corporate desire to align strong financial results In September, THL Credit Advisors became
all signed onto an agreement with the state of with measurable ESG practices and regulatory the latest name to be added to a growing list
California to reduce the fuel consumption of their reinforcement. of credit managers (which includes UK-based
new car fleet through 2026 while simultaneously Permira Debt Managers, Fair Oaks Capital and
reducing carbon emissions from the same fleet OPPORTUNITIES FOR INNOVATION Bardin Loan Advisors) to integrate ESG ideals
offering. A fifth automaker, Mercedes Benz, is There is still a long way to go. ESG develop- into their investment decision making.
expected to sign on shortly. ment has been a market concept for roughly 25 About 20 global collateralized loan obligation
Each of these automakers have ESG scores years, originating from an intrinsic motivation to (CLO) fund managers have signed onto the
going back several years, most showing steady define what sustainable behavior is, but greater UN-endorsed Principles of Responsible Invest-
improvement over the last three years to score standardization and guidance around principles ment. This is not to suggest that any of these
north of 75.5 (out of a perfect score of 100), is required. managers are foregoing returns or investing
according to Refinitiv ESG. Currently, there is no framework to measure the exclusively in ESG-linked names. However, it does
Volkswagen AG is a notable exception with a impact of specific financial instruments and/or mean they believe they can make better informed
score of 66.42 in 2017, down from 71.30 in 2015 structures on corporate ESG behavior or scores. decisions by including ESG considerations in their
following receipt of notice of violation of the And it is premature to link sustainability-linked portfolio management criteria.
Clean Air Act by the US Environmental Protection financings to measurable positive impact on
LOANLYPLANET © | Page 2
GREEN LENDING ATLAS
UK: Peabody Trust has secured a £75m France: EDF signed
five-year sustainability-linked two €300m bilateral
revolving credit facility from BNP Paribas. RCFs linked to CO2
emissions and
energy efficiency

US: US agencies are

proposing a plan
to revoke California's Japan: Empresas CMPC is making
authority to set its its loan market debut with a
own vehicle US$100m–$150m Green loan.
greenhouse
gas standards.
Bahamas: Singapore: City Developments has obtained
The Caribbean a S$250m (US$180m) RC linked
Development Bank, which helps to sustainable development goals.
Caribbean naons finance social and
economic programs, will provide
relief funds to Hurricane Dorian vicms.

Chile/Columbia/Peru:
Chile became the
first ever Lan American country Australia: Frasers Property raised a
to sell Green bonds earlier A$750m (US$525.8m) five-year term loan
this year in both dollars with 10 lenders joining in general syndicaon.
and euros. Colombia and Peru
are eyeing the possibility.

LEAGUE TABLE

YTD’19 Global Green & ESG-linked Global Top Tier Lender League Table (by Deal Count)
Total Volume Market
Rank Lender Parent Deals (m)(USD) Share
1 BNP Paribas SA 37 3,644.71 5.7%
2 ING Group 31 2,600.27 4.1
3 Banco Santander SA 27 2,954.15 4.6
4 Credit Agricole Corp & Invest Bank SA 26 2,533.35 4.0
5 HSBC Banking Group 24 2,316.31 3.6
5 Mizuho Financial Group Inc 24 2,039.55 3.2
7 Mitsubishi UFJ Financial Group Inc 23 1,774.76 2.8
8 Societe Generale SA 20 1,900.85 3.0
9 Banco Bilbao Vizcaya Argentaria SA [BBVA] 19 2,234.11 3.5
10 JP Morgan 18 3,252.26 5.1
10 Citi 18 2,465.10 3.9
12 Natixis SA 17 1,546.36 2.4
13 Barclays 17 1,430.65 2.2
13 Bank of China Ltd 16 1,159.54 1.8
15 Bank of America Merrill Lynch 15 3,540.25 5.5
15 Rabobank 15 1,379.13 2.2

includes: Bookrunner, Lead Arranger, Mandated Lead Arranger and sole lender titles only

LOANLYPLANET © | Page 3
IN THE NEWS
THL develops new ESG framework CMPC`s green loan attracts six been slower off the mark. But that is gradually starting
THL Credit Advisors announced that it had developed Chilean pulp and paper company Empresas CMPC SA to change in a region that has had a mixed experience
a new investment framework for assessing environ- has closed a US$100m five-year debut green loan in with Green bond issues.
mental, social and governance (ESG) factors when Japan, the first such borrowing for a foreign company Chile became the first ever Latin American country
analyzing credits. in the country, sources said. to sell Green bonds earlier this year in both dollars and
The firm, which oversees US$16bn in assets, intends Six regional lenders joined in general syndication. euros, while heads of public credit tell IFR that Colom-
to increase its consideration of ESG factors and under- MUFG was the sole mandated lead arranger of the bia and Peru are both eyeing the possibility as well.
stand the impact on long-term value across its tradable loan, which pays an interest margin of 105bp over Libor. Such sovereigns are only just picking up the baton
credit portfolio that includes syndicated bank loans, The borrower was originally looking to raise from the region’s corporates which have been tapping
high-yield debt, Collateralized Loan Obligation (CLO) US$100m–$150m. the Green bond market since Peru’s Energia Eolica, a
debt and equity, and its direct lending portfolio, THL The deal is in accordance with the Green Loan Prin- wind farm operator, issued Latin America’s first such
said in a news release. ciples established by the Loan Market Association and security in December 2014.
“A global transition is now underway to finance a the Asia Pacific Loan Market Association. Since then Brazilian corporates have dominated
more resilient, transparent and sustainable economy, The borrowing will help CMPC diversify its funding the LatAm space, making up 48% of Green issuance
and we want to demonstrate leadership in responsible sources. since 2014, followed by Chile (16%) and Mexico (13%),
investing in the credit management sector with our CMPC’s previous loan market visit was in June 2005 respectively, according to S&P.
current products and future ESG strategies,” Chris Flynn, for a US$100m seven-year senior loan. BBVA was the Over that time period, corporates and development
chief executive officer of THL Credit, said in the release. agent on that deal, according to LPC data. banks have comprised 80% of all Green bonds out of
“We believe our proprietary, systematic approach to CMPC, rated BBB−/BBB (S&P/Fitch), has forestry the region as of May, according to the rating agency.
analyzing ESG related metrics provides a valuable insight and wood pulp operations in Chile, Argentina, Brazil, And despite such strides Green issuers from the
into an issuer’s credit profile.” Colombia, Mexico, Peru, and Uruguay. – WS region still only account for a small fraction of overall
The framework is based on guidelines consistent with volumes globally and from emerging markets.
the United Nations backed Principles of Responsible Of the over US$100bn of Green bonds issued globally
Investment and measures ESG metrics and comparable year to date, just US$3.5bn came from Latin America,
data sets to evaluate a company’s ESG risks. – KH Leo signs second green loan or roughly 3.5% of that issuance, according to the
Printing company Leo Paper Group (Hong Kong) Ltd Climate Bonds Initiative and Refinitv data.
signed a HK$400m (US$51m) green loan, according to Even so, with its recent deals, Chile is now among the
a company press release, its second such borrowing top 10 sovereign issuers globally in term of amounts
Olam agrees US$525m loan in a year. raised through Green bonds, according to Moody’s.
Singapore-headquartered agri-business Olam Inter- Eight banks provided HK$50m each to the four-year France leads the pack with US$20.825bn raised
national has signed a US$525m revolving credit facility term loan and revolving credit facility – Bank of China this way as of June 20, followed by the Nether-
(RCF) with a margin linked to the company’s achievement (Hong Kong), Bank of East Asia, BNP Paribas, Citigroup, lands (US$6.662bn), Belgium (US$5.548bn), Poland
of certain sustainability-linked goals. Hang Seng Bank, HSBC, Mizuho Bank and MUFG. (US$4.262bn), Ireland (US$3.459bn), Indonesia
Proceeds refinance existing loans of Olam and its Leo Paper Group Finance Ltd is the borrower. (US$2bn), Hong Kong (US$1bn) and Nigeria (US$71m).
subsidiaries. Funds are partly for a project aimed at reducing energy
The financing, which is for wholly-owned subsidiary consumption and carbon emission at the company’s
Olam Treasury Pte Ltd, comprises a US$315m one- factory in Heshan in China’s Guangdong province,
year RCF, a US$105m two-year RCF and a US$105m and to curb and treat waste at Leo Paper’s printing TriLinc teams with Origin for LatAm expansion
three-year RCF. factories in China. Impact investor TriLinc Global has teamed up with
Interest margins are linked to the company’s achieve- The remaining proceeds are for building an 80,000 Origin Funding Partners to expand its term loan and
ment of key performance indicators (KPIs), which are square metre green plant in Vietnam, according to trade finance capabilities throughout Latin America,
aligned to the areas of prosperous farmers and food sources. The factory in Vietnam is expected to start the company said in a press release.
systems; thriving communities; and regeneration of production in 2021, according to the press release. TriLinc and Origin Funding’s partnership will service
the living world. Last September, Leo Paper raised HK$350m from business expansion opportunities and socioeconomic
The KPIs will be tracked and reported on by Olam’s a green loan that had seven banks participating. The development across the region.
corporate responsibility & sustainability team with an lenders were BEA, BNP, Citigroup, Hang Seng, HSBC, The impact investor provides growth-stage loans and
independent assessment of the achievement scores by Mizuho and MUFG. trade financing to small- and medium-sized enterprises
Ernst & Young using pre-agreed procedures that have Proceeds from that deal are for investments in in developing economies.
been approved by the banks. green projects in China from 2018 to 2020, including Origin Funding manages transactions in Latin America
“This facility, following on from last year’s US$500m energy conservation, emission reduction, and waste and Africa, and partners with funds, development banks
sustainability-linked loan, is another demonstration of and wastewater management projects. and institutional investors. – AW
how we are embedding sustainability into all aspects of Leo Paper was the first privately owned Hong Kong
our business and financing strategy,” A Shekhar, Olam’s company to receive the Green Finance Certification
chief operating officer, said. from the Hong Kong Quality Assurance Agency.
“In turn, this will enable us to tackle the many challeng- According to LPC data, Leo Paper Group raised a AgBank obtains maiden US$200m green loan
es facing our sector and fulfil our purpose to Re-imagine HK$530m five-year club loan in June 2017 from six Agricultural Bank of China Singapore branch has
Global Agriculture and Food Systems”. banks through its wholly-owned subsidiary, Leo Paper raised a debut US$200m Green club loan, accord-
ANZ, BNS and Rabobank are senior mandated lead Group Finance. – AL ing to a press release from BNP Paribas and United
arrangers while BBVA, DBS Bank, Santander, Barclays, Overseas Bank.
HSBC and Standard Chartered Bank are mandated The two banks were the joint green structuring ad-
lead arrangers. visers and coordinators of the facility, which is the first
Rabobank is sustainability coordinator while HSBC LatAm sovereigns join green bond run under the borrower’s sustainable financing framework.
is facility agent. Sovereign bond shoots are starting to sprout in Latin Other lenders that joined the deal as arrangers are
Olam’s US$500m three-year revolving credit from America, where governments from Patagonia to the the Singapore branches of Bank of America Merrill
March last year was the first loan in Asia to tie the Caribbean are establishing their environmental, social Lynch, HSBC, ING Bank, Standard Chartered Bank and
interest margin to the borrower’s performance on and governance (ESG) credentials. Wells Fargo, sources said.
environmental, social and governance metrics. – AR While the region’s corporates have been issuing Green AgBank’s Green loan is part of a bigger US$465m club
bonds for a while now, Latin American sovereigns have facility for which UOB is also the agent. – CW

LOANLYPLANET © | Page 4