Global sustainable lending volumes reflect a continuation of a tight lending market

Breaking down trending sustainable* trades and themes to help those within Private Finance get ahead of the latest issues shaping the market.

Sustainable syndicated lending market

  • Total global sustainable lending volume at the end of February was USD 17 billion - 56% lower than for February 2022 (USD 39 billion), reflecting a continuation of a tight lending market (see Figure 1).
  • Despite constrained lending more broadly, a mixture of greenwashing concerns and a prioritisation on liquidity needs, we’ve seen a drop in sustainable lending volumes as a relative share of total lending year to date (YTD). Currently YTD this is at 7.1% (vs 12.2% in H2 2022).
  • As would be expected, we also note that sectoral drivers of sustainability linked loans has been very heterogeneous YTD. Volumes in North America were concentrated in 3 sectors (Real Estate; Computer & Electronics; Construction) whilst in Europe there was more diversification (with Utility & Energy the most active sector). See Figure 2 for more details.
  • Notable sustainable lending transactions in the month of February include: the amendment of a USD 3.2 billion facility for computer & electronics firm, Jabil (now including a greenhouse gas (GHG) emissions key performance indicator (KPI)), as well as KKR’s acquisition of Hitachi Transport Systems (HTS) in Japan, which was accompanied by a USD 2 billion sustainability linked facility.

Figure 1: Global sustainable lending volumes, 2023 YTD (USD billion)

Source: Dealogic, 26/03/23

Figure 2: Global sustainability linked lending – sector split by region, 2023 YTD (USD billion / % share of sustainability linked lending volumes in region)

Source: Dealogic, 26/03/23

Sustainable deal activity

M&G and Citi make EUR 356 million investment into first German residential solar ABS. Berlin-based Greentech Enpal, has securitised European solar loan receivables in partnership with both Citi and M&G. The commitments will additionally be used to finance more than 12,500 new solar systems for Enpal’s customers, including energy storage and electric vehicle charging systems.

Fortuna Consumer Loan ABS 2023-1 securitises 48,000 loans worth EUR 350 million. German peer-to-peer lender Auxmoney has placed its third and largest secured bond to date on the capital markets – one of the largest social bonds issued by a fintech in Europe. The social bond aims to promote social and financial participation using a “a more differentiated risk assessment”.

MAPFRE AM launches MAPFRE Private Debt, FIL a private debt ‘fund-of-fund’ with the aim of exposure to 15 large fund managers; priority is given to those investments with robust ESG criteria.

Permira announces pricing of EUR 398 million collateralised loan obligation (CLO), Providus VIII. It contains specific ESG eligibility criteria in the documentation, covering restrictions on the nature of industries in which the CLO can invest.

Climate and ESG announcements by sponsors (as of 31 March 2023)

$11 trillion investor group announces policy to end financing new oil and gas projects

  • Investors targeting net zero portfolio emissions under their commitment to the $11 trillion Net Zero Asset Owner Alliance (NZAOA) will call on oil and gas companies to set emissions reduction targets aligned with global climate goals; according to the NZAOA’s newly released “Position on the Oil and Gas Sector”.
  • The NZAOA’s new Position outlines the alliance’s guidance for members regarding their approach to the oil and gas sector, along with its expectations for investors, and oil and gas companies, as well as for policymakers. 
  • According to the NZAOA, the position is based on frameworks and models including the Intergovernmental Panel on Climate Change’s (IPCC’s) 1.5°C scenarios, as well as on the One Earth Climate Model (OECM) and the International Energy Agency (IEA) Net Zero by 2050 Roadmap.
  • The NZAOA’s position on oil, gas and associated energy infrastructure project investment holds that no new upstream oil and gas fields “should be financed, built, developed, or planned,” with investments limited to existing fields. While investments in mid-stream pipeline distribution and storage should be limited to brownfield projects and no investments should be made in oil-fired power generation infrastructure or in new gas infrastructure, unless designed with sufficient carbon reduction measures.

Schroders launches 'climate-plus' impact fund

  • Schroders Capital has launched a climate-themed fund targeting positive impact, with UK master trust Cushon as the strategy’s founding investor.
  • The specialist private markets investment division of London-based Schroders said its Climate+ long-term asset fund (LTAF) was designed to help UK pension fund investors support the net zero transition.
  • The Climate+ fund, a diversified multi-private assets product, aims to contribute positively to climate change and support the transition towards net zero economies. It will aim to invest across four themes: climate mitigation, climate adaption, biodiversity / natural capital and social vulnerabilities.
  • It will allocate to infrastructure, real estate, private equity, natural capital and biodiversity-focused assets, through a mixture of Schroders Capital and externally managed funds.
  • The fund manager said it will also use the “extensive experience” of impact investment specialist BlueOrchard, which Schroders acquired in 2019, “to deliver a high impact strategy, aligning to the Operating Principles for Impact Management (OPIM)”.

ECB: Climate disclosures a 'priority' for structured finance assets

  • Encouraging climate-related disclosures on the assets underpinning structured finance products is a "priority", the European Supervisory Authorities (ESA) and European Central Bank (ECB) have said in a joint statement.
  • The organisations encourage the development of disclosure standards for securitised assets through "harmonised climate-related data requirements".
  • According to ESAs and ECB, issuers of these assets should collect information on their climate-related risks during the origination process.
  • A lack of climate-related data on assets underlying structured finance products poses an "obstacle" to adoption of the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR).
  • The ESAs and the ECB are "committed" to supporting better disclosures for structured finance products. Measures include developing regulatory technical standards under the EU Taxonomy and the SFDR, and requiring additional disclosures on decarbonisation targets under the SFDR.

Robeco raises €130 Million for new sustainable loan fund

  • International asset manager Robeco announced the launch of the Robeco Sustainable Senior Loan Fund (SLF), a new closed-ended private debt fund investing in sustainable development goal (SDG)-screened companies and financing measures for companies to improve sustainability.
  • The new fund aims to take advantage of the shift in lending from bank lending to alternative lenders. The fund will deploy capital to small and mid-sized companies in “economically strong and lender-friendly European regions”.
  • To integrate sustainability factors, the fund will apply screening on the UN SDGs, and will also finance “tangible and meaningful measures that a prospective borrower is willing to take to improve its sustainability profile”.

Mirova raises over $170 million for emerging markets clean energy fund

  • Sustainability-focused investment manager Mirova announced the first closing of its Mirova Gigaton Fund, raising $171 million for the blended finance debt fund aimed at accelerating the clean energy transition in emerging markets.
  • The Gigaton Fund aims to provide medium- to long-term debt financing for clean energy projects, primarily in emerging countries in Africa and Asia Pacific, as well as in Latin America and the Middle East.
  • The fund focuses on mostly small and medium-sized enterprises (SMEs), with industries including solar home systems, agri-solar, battery storage and energy efficiency.
  • Mirova said that the fund’s target size is $500 million, and it expects to deploy $1.2 billion of private debt through its life.
  • Raphaël Lance, Head of Energy Transition Funds at Mirova, is confident that the “Mirova Gigaton Fund constitutes an interesting opportunity to finance the energy transition around the globe”

SWEN closes €170m blue ocean fund

  • SWEN Capital Partners has closed its Blue Ocean Fund with €170 million ($180.3 million) committed towards ocean health regeneration
  • The impact fund, which exceeded its initial target of €120 million, raised 85% of its funds from European and American institutional investors. This includes Crédit Mutuel Arkéa, the French Public Investment Bank, Abeille Assurances and the Planet Ocean Fund.
  • The fund was originally launched in September 2021 with French ocean research institute Ifremer to finance around 25 start-ups tackling the ocean’s largest threats: overfishing, pollution and climate change.
  • It has already invested in nine companies, including shipping cleaning service ECOsubsea, maritime emissions data provider Spinergie, and biodiversity monitoring service NatureMetrics.

Aviva completes divestment of £2.5bn in fossil fuel companies

  • Aviva has divested almost all its £2.5 billion ($3 billion) exposure to fossil fuel companies on its “Stoplist” of firms with ‘weak ambitions’ to reduce their climate impact.
  • The Stoplist is Aviva’s list of fossil fuel companies that fail to sign up to science-based targets towards net zero, or fail to have the targets validated within 18 months of submission. It comprises 202 thermal coal extraction and power generation companies with a total exposure of £2.5 billion.
  • Aviva has also progressed its Climate Engagement Escalation Programme (CEEP), a three-year correspondence plan launched in 2021, to help the net zero transition of Aviva’s 30 most systemic carbon emitters across its credit and equity portfolios.
  • According to Aviva: “22 companies (73% of the total under the CEEP) have announced or strengthened their ambition to achieve net zero by 2050 or sooner.” In 2023, if progress falls short of expectations, Aviva said "it will take appropriate escalation action to amplify pressure".

The UK Infrastructure Bank to invest £200m in energy storage

  • The UK Infrastructure Bank has announced it will invest £200 million ($246 million) in two energy storage investment funds, with an aim to get match-funding from the private sector.
  • The UK government-owned bank will invest £75 million into the newly launched Gresham House Secure Income Renewable Energy and Storage LP on a match-funding basis.
  • The fund will focus on developing renewable generation and short duration electricity storage facilities in the UK. Its initial project will the construction of a solar and battery energy project in the north of England.
  • The infrastructure bank has announced it will also invest £125 million into the Equitix UK Electricity Storage Fund on a match-funding basis.  
  • This aims to deliver short- and long-duration storage, including household installations and pumped hydro.

ESG data, articles and market initiatives

TNFD reveals first 14 core disclosure metrics

  1. Extent of land / freshwater / ocean use change, by type of ecosystem and business activity.
  2. Volume of water discharged and concentrations of key pollutants in the wastewater discharged by type.
  3. Proportion and total annual revenue / value of assets with substantial dependence on ecosystem services or with a high impact on nature.

UK Energy Security Day: measures for net zero, including green finance strategy announced

Integrity Council for the Voluntary Carbon Market Core Carbon Principles

  • The Integrity Council for the Voluntary Carbon Market (Integrity Council or ICVCM), an independent international governance body for the voluntary carbon market, has published its Core Carbon Principles which are intended to act as a global benchmark / standard for high-integrity carbon credits and which set rigorous requirements on disclosure and contribution to sustainable development.
  • A high-integrity voluntary carbon market (VCM) can help unlock urgently needed finance to reduce and remove billions of tonnes of emissions.

Sustainalytics launches 'low carbon transition ratings'

  • Sustainalytics has launched Low Carbon Transition Ratings, which it has said "provides investors with a forward-looking assessment of a company's current alignment to a net-zero pathway".
  • The framework measures the degree to which a company's projected greenhouse gas (GHG) emissions differ from a net-zero pathway between now and the year 2050.
  • The Low Carbon Transition Ratings are categorized across five levels of net-zero alignment: Aligned (0°C to1.5°C), Moderately Misaligned (1.5°C to 2°C), Significantly Misaligned (2°C to 3°C), Highly Misaligned (3°C to 4°C), and Severely Misaligned (4°C +).
  • The model uses the 1.5°C Required Policy Scenario developed by the Inevitable Policy Response initiative.

Private Markets ESG Data Platform Novata Raises $30 Million

  • Private markets ESG-focused technology platform Novata announced today that it has raised $30 million in a series B funding round, less than a year after the commercial launch of its ESG data management platform.
  • Novata is a public benefit corporation founded in 2021 by a consortium including S&P Global, the Ford Foundation, asset management firm Hamilton Lane, social change-focused investment firm Omidyar Network, and supported and advised by several leading private equity firms and pension funds, to provide private markets investors with a solution for ESG measurement, data collection and benchmarking, and to enable reporting on ESG data.
  • Alex Friedman, CEO & Co-Founder at Novata, said: “Novata is ideally positioned to meet the evolving challenges and to help drive progress on ESG transparency and reliability in the private markets.”

CDC Biodiversité to add three sectors to biodiversity footprint tool

  • CDC is planning to expand its biodiversity footprinting tool to enable simplified assessments of three sectors in more detail, as asset managers trial the methodology with private portfolio companies.
  • The biodiversity specialist hopes to integrate simplified methodologies for private companies in three sectors into the tool. These sectors are: household and personal products; food, beverages and tobacco; and renewable energy.
  • Although the simplified tool dedicated to private equity can be applied at a broad level to any sector, it can currently only be used at "granular level" with the real estate sector, says Violette Pradère, project officer of CDC Biodiversité

RepRisk launches tool to address ESG ratings opacity

  • Credit research institute I-CV has launched ‘ESG Radar’, a data management platform, in partnership with ESG data business RepRisk, to address the "opaque methodologies" in existing ESG ratings and help investors get more information on underlying ESG risk in their portfolios.
  • ESG Radar will enable investors to compare statements and pledges made in company filings with real-life business conduct and risk incidents, by combining company-sourced reporting with external data collected by the data business.

Upcoming webinars and events

Stepping up on biodiversity: how are investors taking action since COP15?

PRI (Hosted April 18th 1:00pm BST, Virtual)

In the run-up to COP15, institutional investors showed their strong support for an ambitious and enabling Global Biodiversity Framework (GBF), with over 150 financial institutions - representing over USD 24 trillions of assets under management - signing a statement coordinated by the UNEP Finance Initiative, Finance for Biodiversity Foundation, and the Principles for Responsible Investment (PRI).

This webinar will explore the type of actions that leading investors are undertaking to contribute to the goal of the GBF to “halt and reverse biodiversity loss by 2030” and discuss the wider direction of travel for the financial sector to meet both climate and nature goals.

Additional details of the event and a link to register

For those looking to discuss any of the above further, please reach out to our authors:

  • Rahel Haque, Vice President, Climate and ESG Capital Markets
  • Vishal Saxena, CFA, Associate, Climate and ESG Capital Markets
  • Fazl Ahmad, Analyst, Private Finance Structuring and ESG 

*For any unfamiliar terms used within this article please refer to our Insights glossary

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