As sustainability initiatives found new impetus in 2020, one bank stood out for its determination to use its financing capabilities to promote real change. For leading by example, BNP Paribas is IFR Asia’s ESG House of the Year.
BNP Paribas took up the challenge of promoting a green and sustainable recovery across Asia in 2020.
It helped clients respond to the coronavirus crisis by accessing a growing pool of sustainable liquidity. It expanded the use of sustainability-linked pricing to new industries and asset classes and captured growing interest in social instruments to promote financial inclusion in markets such as India.
The bank’s work on transition finance was especially impressive. It introduced innovative instruments to encourage real progress and helped structure sustainability-linked financings for borrowers in the energy and transport sectors.
“Transition is key for clients. They must be able to answer tough questions around ESG,” said Chaoni Huang, head of sustainable capital markets for Asia Pacific. “Everyone knows how to do a green bond.”
Transition finance took on new significance in 2020 as Asian governments formalised their commitments to become carbon-neutral over the coming decades. China plans to begin reducing carbon emissions by 2030 and reach net zero by 2060, while Hong Kong, Japan and South Korea are all targeting net zero by 2050 – in line with the European Union’s agenda.
While many banks and investors are still wrestling with their own standards and remain wary of the “transition” label, BNP has a clear agenda that applies throughout the institution. It has set ambitious global targets for green finance and ramped up its commitment to a sustainable future last year with a pledge to end all coal-related financing by 2030 in OECD countries and 2040 in the rest of the world.
“We have integrated sustainability decisions into everything we do. It is embedded in the daily dialogue,” said Noemie Peiffer, chief operating officer for Asia Pacific investment banking.
Rather than simply walk away from its clients in the mining or energy sectors, it works with companies that share its commitment to a greener future, such as Hong Kong coal-fired power station operator Castle Peak Power. BNP was mandated lead arranger on a HKS$1.96bn 15-year energy transition loan with coverage from Chinese export credit agency Sinosure to help fund an LNG complex, as well as a bookrunner on a US$350m 10-year transition bond.
BNP took action to promote the transition concept in Australia with a A$140m (US$99.5m) bond linked to a new equity index designed by BNP and its partners to identify companies that can adapt or thrive in Australia’s transition to net zero emissions by 2050.
BNP also broadened the market for sustainability-linked loans, a format that uses variable pricing to incentivise best practices and is fast becoming an important tool in promoting Asia’s transition to a more sustainable future.
The French bank was joint sustainability coordinator on a A$1.4bn (US$1.03bn) sustainability-linked loan from Australian contractor Downer EDI, which attracted an unprecedented 24 banks in general syndication and included both environmental and social sustainability targets.
The margin varies as much as 10bp, depending on Downer’s performance against those goals.
BNP also showed its capacity for innovation with a US$125m 14.9-year cross-currency swap for Hong Kong landlord Hysan – the first ESG-linked rates derivative in Asia. If Hysan fails to meet sustainability targets, including a reduction in energy consumption, it will make financial contributions to impact-driven local projects or charities via BNP.
The coronavirus pandemic put the spotlight on social financing in 2020, and BNP was instrumental in helping companies harness the capital markets to respond to the crisis. It was especially active in South Korea, where it helped Kookmin Bank support small businesses with a US$500m Tier 2 Covid-response sustainability bond and a €500m sustainability covered bond. It also brought Korea Housing Finance Corp to the social covered bond market twice, among other highlights.
Even before the Covid-19 crisis, BNP helped India’s Shriram Transport Finance launch a popular debut social bond in January 2020 as joint bookrunner and joint social structuring adviser.
It was also joint global coordinator on a novel blue bond from Bank of China, to fund sustainable marine projects.
The bank rose four places to third in the league table for green, social and sustainability bonds in Asia Pacific in IFR’s review period.
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