After the Green Bond and the first green digital Schuldschein, VERBUND is now placing the world’s first loan evaluated purely in accordance with sustainability criteria.
VERBUND successfully placed the first ESG (Environmental Social Governance) linked syndicated loan in the amount of 500 million euros with 12 banks on 10 December 2018. VERBUND has thus set another milestone in the area of Green Finance. This loan is the first in the world whose interest rate over the entire term is no longer determined according to the financial rating at the established financial rating agencies but purely according to the sustainability rating provided by a sustainability rating agency.
Innovative green financial products
As Austria’s leading power company, VERBUND places a high strategic focus on the topic of sustainability. VERBUND has already built up a long-term track record and advanced numerous innovative financial products in the area of Green Finance. For example, in 2014, VERBUND was the first company in the German-speaking countries to issue a Green Bond (500 million euros), whose funds are used solely to finance certified projects in the area of hydropower and wind power, which make a lasting contribution to the avoidance of CO2 emissions. In 2015, VERBUND converted its long-term investments to cover pension and severance claims to sustainable criteria and in doing so gave another clear signal in the direction of sustainable investment. In spring 2018, VERBUND issued the world’s first digital green Schuldschein (100 million euros), whose funds were used to finance the high-voltage network expansion in Austria in order to guarantee the inclusion of new, renewable energies.
Financial innovation: ESG-syndicated loan
The current transaction is yet another innovation: VERBUND is taking out a syndicated loan with 12 banks in the amount of 500 million euros and a term of 5 years. The interest rate is set once a year during the term of the loan and solely on the basis of an external sustainability rating.
“With the issue of the first loan assessed purely in accordance with sustainability criteria, VERBUND is one again setting an important milestone in the area of green finance and sustainability, having been the first company in the German-speaking countries to issue a green bond and the world’s first digital green Schuldschein. In doing so, VERBUND is making a cross-border impulse and confirming its international role as a driver of innovation,” says VERBUND CFO Peter Kollmann.
Sustainalytics, a leading global provider of ESG research and ratings, assessed VERBUND and provided the firm with its ESG Risk Rating score, which was used for the syndicated loan. If the sustainability rating (ESG rating) of VERBUND declines, the cost of the loan rises; if the sustainability rating of VERBUND improves, the cost of the loan falls. This means that there is an extensive decoupling here from the established financial rating. VERBUND is taking this step with the aim of underscoring the credibility of its sustainability strategy and providing new, international impetus in the direction of Green Finance as a driver of innovation.
In the picture: Peter Kollmann, CFO VERBUND and Jean-Claude Berthelot, Associate Director, Sustainable Finance Solutions, Sustainalytics