Natixis CIB seeks partners to boost transition financing
Natixis Corporate and Investment Banking is using its ESG expertise to build new private partnerships that will boost the bank's ability to finance a range of low-carbon technologies for the energy transition.
The French bank is active in growth areas including wind and solar storage, sustainable aviation fuel and green ammonia and steel. It is seeing the biggest opportunity in data centres that power artificial intelligence and is looking for new partners as the huge investment required could outstrip its balance sheet.
"Last year we were number one in data centres and optic fibres in tech infrastructure. I cannot stay number one if the market is doubling every year because my balance sheet will not double every year – I need partners," said Mohamed Kallala, global head of Natixis CIB.
Natixis is part of Groupe BPCE and transition is the key theme of the parent's "Vision 2030" plan announced in June. It includes a "Scale Up" strategic plan for 2024 to 2030 for its financial services division, which includes Natixis CIB and Natixis Investment Managers.
ESG strategic dialogue and advisory is the cornerstone of the plan to scale up, which also covers technological transition via digitisation as well as the transformation of the financial services industry through the growth in private credit. ESG is central to Natixis CIB's plan to grow revenue more than 5% a year by 2026 and green revenues by 1.5x the CIB figure.
"ESG is an additional lever to support the growth of Natixis CIB. We see ESG as more and more strategic in discussions with clients," said Laurie Chesne, head of green and sustainable financing and advisory for EMEA.
Partnerships underway
While the bank is relying on its traditional strengths in infrastructure, green financing and equity derivatives to deliver growth and attract partners to invest in deals that it will structure, hedge and syndicate, Natixis CIB's work on "green enabling" activities is at the forefront of the energy transition, which could have a broader appeal in growth markets such as Asia and North America.
Green enabling activities are key to green projects but are not necessarily considered green in their own right. For example, sustainable lithium producer Vulcan Energy appointed Natixis CIB as coordinator on the first green enabling financing in July, which will fund the production of renewable energy and lithium hydroxide for electric vehicles batteries.
"We're ahead of the curve in ESG," Kallala said. "We want to accelerate our growth while being disciplined in managing our balance sheet usage. If we partner with an investor with the same risk appetite, we can originate more and that is our plan," he added.
The plan seems to be working. South Korean retail bank Woori Bank signed a strategic alliance on June 27 for cooperation on global private debt funds and direct lending activities. Woori Bank is providing US$200m and will invest alongside Natixis CIB, which supplied US$50m, creating a US$250m fund that will target global infrastructure, renewable energy, and real estate.
The French bank is looking for partners to buy the debt it is structuring either on a name by name basis or as investors in a portfolio of debt built by Natixis that can either be packaged as single-name funds (such as Woori Bank) or as Collateralised Loan Obligation funds. Natixis CIB is planning to issue a new CLO either later this year or early next year.
The agreement with Woori Bank means Natixis now has 17 partnerships in infrastructure finance and M&A, including LBBW, which signed a cooperation agreement in October 2021 that was aimed at generating joint M&A advisory mandates.
Natixis typically acts as an M&A adviser by bringing together investors, producers and end users and structuring debt with hedges that protect against failure to repay due to market volatility on transactions such as the US$11bn financing backing Pattern Energy's SunZia wind and transmission project in the US, which closed in December.
The bank's role in global infrastructure and growing hedging business is giving an edge as Natixis pushes to increase the volume of financing that it is originating by 25% by 2026 as it targets growth in APAC and the Middle East and expansion in North America with a focus on financial sponsors.
"I think the profitability will come from North America, South East Asia and Australia," Kallala said.