Sustainable syndicated lending market
- Following the peak in syndicated lending in March ($564bn), global lending volumes have reduced in April ($359bn) partly governed by a difficult fundraising environment.
- Both private capital deals and the buyout market have slowed considerably in comparison to the strong final quarter last year, by 14.1% and 55% respectively.
- Similarly, global sustainable lending has also decreased by $56bn from its peak in March to $18bn in April, which can be partially attributable to greenwashing issues and market cautiousness around the ambitiousness of Sustainability Performance Targets (SPTs), as well as ongoing costs associated with the process of pursuing such transactions (e.g. annual verification for Sustainability-Linked Loans).
Sustainable deal activity
Maincubes secures green loan financing for €1bn facility
German data centre provider, Maincubes, has successfully added sustainability targets to its existing growth financing, linking the achievement of these targets to the financing conditions.With its ambitious annual targets, Maincubes aims to increase the energy efficiency of its data centres, reduce the CO2 greenhouse potential of refrigerants, and further expand the sustainability training for its employees.
EnFin closes inaugural $253 million solar ABS transaction
Qcells, a manufacturer in complete clean energy solutions and a key player in the US solar market, announcedEnFin by Qcells(EnFin), its residential solar financing platform, completed its first asset-backed securities (ABS) transaction totalling$252.86 million. The transaction comprises bonds backed by thousands of consumer loans used to finance residential solar installations.RBC Capital Markets acted as the sole structuring advisor and bookrunner, and Santander served as co-manager in the transaction.
Aquila closes New Zealand renewables financing
Aquila Clean Energy APAC and New Zealand developer, Far North Solar Farm (FNSF) have closed a project financing for four New Zealand projects. Westpac New Zealand agreed to lend an undisclosed amount on a non-recourse basis to finance the uncontracted portfolio. The loan qualifies for Westpac’s Sustainable Lending Programme and will align with the APLMA Green Loan Principles.
Climate and ESG announcements by Sponsors (as of 21 May 2024)
Santander loans €300m green and sustainable financing to TPG Rise-backed business
MatrixRenewables (“Matrix”), the TPG Rise-backed global renewable energy platform, and Santander Corporate & Investment Banking (“Santander CIB”) have successfully closed a €300 million corporate debt financing. The financing will allow Matrix to expedite the growth of its platform by allocating funds towards the construction of its advanced development portfolio in all of its existing markets, includingSpain, US,ItalyandChile. Matrixsuccessfully secured this financing as Green and Sustainability-Linked, aligning it with the Green and Sustainability-Linked Loan Principles.
AXA IM strengthens climate engagement
AXA Investment Managers (AXA IM) conducted 681 climate change-related engagements with 503 entities in 2023, mainly focused on Europe and North America, representing a 14% increase in engagements compared with 2022, including 298 engagements with objectives. Furthermore, 200 of the total engagements were conducted either at board or C-suite level, notes the investment manager’s 2023 Stewardship Report, which showcases the importance of stewardship in the company’s responsible investment strategy, a key pillar of its new strategic plan.
BlackRock and Temasek’s Decarbonization Partners raises $1.4bn for first fund
Climate-focused investor Decarbonization Partners, a tie-up between BlackRock and Singaporean state investment firm Temasek, has raised a higher-than-targeted $1.4 billion for its first fund. Others to back the venture and late-stage growth equity fund, which will focus on companies that can help accelerate the transition to a low-carbon economy, include US insurer Allstate, Spanish lender BBVA and energy firm TotalEnergies.
HASI and KKR establish $2bn strategic partnership to invest in sustainable infrastructure projects
Alternative asset and private equity investor KKR and climate solutions and sustainable infrastructure investment firm Hannon Armstrong Sustainable Infrastructure Capital (HASI) announced the launch of CarbonCount Holdings 1 LLC (CCH1), a new venture aimed at investing up to $2 billion in “climate positive” sustainable infrastructure projects over the next 18 months. Under the new agreement, KKR and HASI have each committed up to $1 billion to the new venture to invest in clean energy assets, with HASI responsible for sourcing investments and managing CCH1. Investments will be consistent with HASI’s existing investment strategy, which includes a focus on behind-the-meter, grid-connected, renewable natural gas and transport projects.
M&G invests €107m into public-private partnership impact fund
M&G Investments has committed €107m into one of the world’s largest impact vehicles to support job creation and poverty reduction in Southeastern Europe. The commitment sees the London-based asset manager invest into the €1.3bnEuropean Fund for Southeast Europe (EFSE), a blended finance vehicle with backing from the European Commission and the European Investment Bank. The fund provides financial access for underserved microfinance lenders and financial institutions in developing countries in Southeast and Eastern Europe.M&G said the blended model has provided micro, small, and medium enterprise funding to more than 50,000 female-owned enterprises.
UK-India fund seeks GPs for climate strategy
United Kingdom India Development Cooperation Fund (UKIDCF) is seeking interest from general partners for three investment programmes, according to a request for proposal (RFP) published yesterday. UKIDCF proposes to invest development capital in impact funds focusing on pioneering climate investments in India, backing green enterprises, as well as early-stage technology startups in underinvested segments. It will commit up to £150m ($191m) for climate adaptation, up to £125m for green enterprises and up to £110m for tech startups.
Australian government wins investor group praise for climate funding
Investor groups have welcomed a AUD22.7 billion ($15.1 billion) funding package that the Australian government has pledged to support the transition to net zero, development of sustainability fund labels and tackling ‘greenwashing’. The Australian government will invest the money over a decade “to help Australia succeed and remain an indispensable part of the global economy as the world undergoes the biggest transformation since the industrial revolution,” said treasurer Jim Chalmers as he announced the 2024-25 budget alongside the country’s prime minister, Anthony Albanese.
Norway’s $1.7tn wealth fund asks Shell for climate strategy disclosure
Norges Bank Investment Management (NBIM), the investment manager for Norway’s $1.7 trillion oil fund, revealed that it has asked Shell to provide more detail into its mid-term climate strategy, although the fund also announced that it will vote against a shareholder resolution calling for the oil giant to set a goal to reduce emissions from the use of its products. The statement, released by NBIM with its voting plans disclosure for the upcoming Shell AGM this week, follows a series ofchanges announced by Shellearlier this year to its energy transition strategy under new CEO Wael Sawan.
Border to Coast raises £1.2bn for climate investment fund
The Border to Coast UK council pension pool has raised £1.2bn for its second climate investment fund. The announcement brings the local government pension scheme’s private markets programme to £16bn following further commitments in April of £3.6bn from partner funds. The pool’s private markets programme has grown rapidly in the five years since it was launched in 2019 and is now around £12bn invested. The latest commitments include £0.5bn pledged to a ‘UK Opportunities’ strategy launched by Border to Coast in April. Designed to direct long-term high-quality investment into ‘productive finance’, it will invest in areas such as housing, transport, energy and growth finance, supporting new building and development across the UK.
Saudi Arabia’s Hassana backs TPG Rise Climate funds with $1.5bn
TPG Rise Climate has secured an anchor commitment of $1.5 billion from Saudi Arabia pension Hassana Investment Company. The commitment is to TPG Rise Climate’s latest transition infrastructure fund, which offers institutional investors exposure to infrastructure and private equity. As part of the “anchor” commitment, Hassana will provide TPG with “local network and expertise”. Earlier this year, the fund manager recently appointed Scott Lebovitzas a partner and head of infrastructure for TPG Rise Climate. Launched in 2021, the TPG Rise Climate fund range makes impact investments across a range of asset classes, including the energy transition, green mobility, sustainable fuels and carbon solutions, and geographies.
IFC, BII and Proparco back Senegal telecoms expansion with €87m SLL
To accelerate Senegal’s digital transformation, International Finance Corporation (IFC) and partners British International Investment (BII) and Proparco announced a financing package for Sonatel to improve essential telecommunications infrastructure in the country and expand access to reliable, affordable mobile and fixed broadband services. The €87 million sustainability-linked loan includes €32 million from IFC, €25 million from BII, and €30 million from Proparco. The funding will help Sonatel, the largest telecom operator in Senegal, expand its telecommunications infrastructure, including towers and cables, particularly in rural areas. The financing will be the first sustainability-linked facility (SLF) in francophone West Africa. It is designed to link the pricing of the loan to the achievement of measurable objectives, making a significant contribution to sustainable development.
ESG data, articles and market initiatives
ESMA guidelines establish harmonised criteria for use of ESG and sustainability terms in fund names
EU markets regulator the European Securities and Markets Authority (ESMA) announced the release of its finalised guidelines for the use of ESG and sustainability-related terms in investment fund names, including investment thresholds required for sustainable investment funds, and the establishment of a transition category for investments that are not yet green, but are on a positive trajectory towards achieving environmental sustainability goals. According to ESMA, the new guidelines were established as investor demand for ESG-focused funds has increased sharply, creating incentives for asset managers to include sustainability-related terms in fund names to attract investors, leading to an increased risk of greenwashing.
FCA proposes anti-greenwashing and sustainability disclosure rules for portfolio managers
The Financial Conduct Authority (FCA), the conduct regulator for financial services firms and financial markets in the UK, announced the launch of a consultation on a new proposal to extend its new Sustainability Disclosure Requirements (SDR), including rules aimed at helping investors assess the sustainability attributes of investment products, and to avoid greenwashing risk, to portfolio managers. The proposal follows therelease by the FCA of its SDR requirements for asset managersin November 2023, which included an anti-greenwashing rule for sustainability-related product claims, as well as rules for naming and marketing funds based on their sustainability characteristics, and for the use of a new sustainable investment product labelling regime.
Circular businesses can outperform companies with ‘improved’ ESG practices
The exit environment for impact investments has become increasingly attractive in recent months, according to Circularity Capital’s Jamie Butterworth, although ‘improving bad ESG practices’ will not always bump up returns. Speaking toEnvironmental Finance, the Circularity Capital partner was bullish about the presence of more private equity firms in the impact market, which is making it a much more attractive exit environment.
Upcoming webinars and events
Capturing the pulse of sustainable investment in fixed income (13 June 2024, Virtual)
Historically, fixed income has lagged equities in terms of the application of sustainable investment practice. But this is changing. Growing investor demand from fixed income investors is being met with a growing range of analysis and investment solutions across the range of asset class. This webinar will look at the main trends and themes in the sustainable labelled bond market as well as considering how climate risk and innovation tools are driving a more granular understanding of how investors can approach sustainable investment strategies in fixed income. Additional details of the event and a link to register.
RI Europe 2024 (12-13 June 2024, London)
Responsible Investor’s 17thannual RI Europe conference is returning to London in June. The 2024 edition of the flagship event will discuss sustainable finance developments and industry best practices.
Gain insights from those leading the sustainable finance drive in Europe on topical ESG themes including accelerating net zero progress, the evolving EU regulatory landscape, getting to grips with biodiversity risk management, the future of ESG data strategy, and more. Additional details of the event and a link to register.
BVCA ESG Conference 2024 (18 June, London)
Join the BVCA ESG Conference 2024 to learn about Guernsey’s role in the transition to net zero in the private capital sector.Guernsey Finance is proud to sponsor the conference which will cover a breadth of ESG topics relevant to private capital including ESG reporting and transparency, data convergence and alignment, supply chains, voluntary carbon markets and diversity, equity and inclusion.Additional details of the event and a link to register.
SuperReturn Energy Transition (4-5 June 2024, Berlin)
300+ players, including 150+ GPs and 90+ LPs, will discuss the best pathways to achieving 2050 goals. Get the latest on macroeconomic developments and the geopolitical environment.
Explore investment opportunities and the future of renewables and traditional energy sources. 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
- Fazl Ahmad, Analyst, Private Finance Structuring and ESG
- Javier Patria, Associate, Climate and ESG Capital Markets
*For any unfamiliar terms used within this article please refer to our Insights glossary.
