The benefits of sustainable finance
Companies facing a refinancing of existing facilities or raising new debt should also be aware of their ability to access sustainable finance or ESG-linked loans. This is a hot topic, and a trend that regulators and the banking community are driving. The latter with its Principles for Responsible Banking.
With the rising focus on sustainability in business, including clear ESG metrics in the terms and conditions of financing arrangements may result in a discount of the interest of the facility of loan, and consequently a lowered cost of financing. We see banks are now more often integrating climate risk into their credit risk assessments.
Before approaching banks and seeking to negotiate an ESG-linked financing, companies, no matter whether they are public or private, must have a clear road map to achieve the anticipated ESG metrics, as they are increasingly likely to be questioned about them.
Everyone from customers to investors is aware of the need to use our planet’s resources in a more sustainable way. It is therefore safe to say that the strong trend around addressing the ESG aspects of capital markets’ transactions is here to stay.