Accelerating the sustainability transition

BNP Paribas won several awards in this year's Environmental Finance Bond Awards. Leading voices at BNP Paribas – and the organisations that they worked with to issue various sustainable bonds and loans – discuss how these developments accelerate wider net-zero ambitions and highlight key sustainable finance trends.

Environmental Finance: You have won the award of Lead manager of the year, sustainability bonds – sovereign, in this year's bond awards. How do you see the development of sovereign sustainable finance?

Laurent Leveque, global head of official institutions coverage, BNP Paribas: In 2020, green sovereign, supranational and agency bonds (SSA) issuance reached €94 billion ($111 billion), representing 8% of the SSA bond market. The sovereign green bond momentum is grounded in governments' plans to align their funding strategies to a 1.5-degree scenario. Financing national transition strategies through sustainability bonds allows governments to invest in decarbonised infrastructure and sustainable development catalysts.

EF: What role does sustainable finance play in accelerating a country's low carbon economy transition?

A spokesperson, Italian Ministry of Economy and Finance (MEF): Italy has entered the market of sovereign bonds that finance sustainable development through the issuance of our 'BTP Green', bond. By doing so, we are widening the country's commitment to the European Commission's framework for achieving climate neutrality by 2050 and the goals set out in the European Green Deal."

BNP Paribas was joint bookrunner for Italy's inaugural sovereign green bond.

EF: Given BNP Paribas' recognition in the financial institutions bond awards category, how are investors engaging with the capital markets on environmental, social and governance (ESG) investing?

Frederic ZorziFrederic Zorzi, global head of primary markets at BNP Paribas: ESG is being integrated rapidly across the global investor base and accelerated with the development of reporting regulation, such as the EU Sustainable Finance Disclosure Regulation (SFDR). Investors are encouraging increased disclosure to better analyse key portfolio risks stemming from extra-financial issues and developing sustainable capital markets through growing demand for access to ESG assets. The two together lead to higher standards in the capital market, ensuring transparency whilst reflecting society's needs.

 

EF: How are companies like Prudential supporting the energy transition?

Nandini Mongia, treasurer of Prudential: At a time when ESG is becoming an increasingly important area of focus in global markets, we are very pleased to underscore our commitment to the environment with an offering that meets the goals and criteria of investors seeking sustainable opportunities.

BNP Paribas served as sole structuring advisor and joint bookrunner on Prudential's green bond.

EF: What have been some key sustainable capital markets innovations from BNP Paribas' perspective?

Delphine QueniartDelphine Queniart, global head of sustainable finance and solutions at BNP Paribas Global Markets: A noticeable progression is that innovation in sustainable capital markets is extending beyond the bond market into other solutions such as convertible sustainability-linked instruments. As the funding needs of our clients evolve to tackle critical environmental and social issues like climate change, nature-related risks, and inequality, we expect to see the further developments of sustainable securitisation solutions and green equity.

EF: Given your bond and loan awards, can you outline key trends ahead for corporate sustainable finance momentum?

Cécile Moitry, co-head, BNP Paribas Sustainable Finance Markets: Sustainability-linked loans (SLLs) will keep on addressing the key challenges faced by corporate clients, financial institutions and private equity sectors. To date, we have seen a focus on decarbonisation targets and some social metrics, but the KPIs will become increasingly standardised within sectors. Convergence and common views of the KPIs with the evolution of sustainability-linked bonds (SLBs) will be key as well.

Agnès GourcAgnès Gourc, co-head, BNP Paribas Sustainable Finance Markets: The game-changer in the bond market is SLBs. Through embedding science-based and tangible KPIs into the public bond market instrument, corporates are materially engaging with investors on their sustainability strategy. The credibility of the targets is essential to the development of the market.

EF: How has sustainability-linked finance supported Tesco's decarbonisation strategy?

Alan Stewart, chief financial officer of Tesco: Tesco was the first business globally to set a zero-carbon goal in 2009 and in 2017 was the first FTSE 100 Company to set science-based carbon reduction targets on a 1.5-degree trajectory. In the same year, we publicly committed to implementing the TCFD recommendations. Linking our financial strategy to our long-term commitment to tackle sustainability is an important step in ensuring that it is embedded across our business.

BNP Paribas acted as joint sustainability structuring advisor and joint bookrunner on Tesco's SLB and sole coordinator and sustainability coordinator for its SLL.

EF: How did Downer's SLL align with the company's sustainability commitments?

Michael Ferguson, chief financial officer of Downer: We are pleased to have the ultimate loan facility outcomes linked to the development of our workforce and our decarbonisation commitments.

BNP Paribas was joint bookrunner and sustainability co-ordinator on Downer's SLL.

EF: Looking ahead, how do you think sustainable finance will continue to evolve in the coming years?

Constance Chalchat

Constance Chalchat, head of company engagement at BNP Paribas CIB: "To ensure that finance remains an accelerator in supporting the sustainability transition of our clients, the tangibility and credibility of the embedded ambitions are critical. This means integrating additionality into the approach to transform a business model beyond business as usual, and will create robust, ambitious and scalable sustainable development roadmaps. For BNP Paribas, drawing on our expertise with both our corporate and investor clients means we can develop material and consequential frameworks and KPIs, whilst also mitigating greenwashing risks.