ESG House: BNP Paribas

IFR Asia Awards 2022
4 min read
Daniel Stanton

No shortcuts

BNP Paribas helped bring IPOs from companies in the electric vehicle supply chain, as sustainability took on new importance to the region’s equity markets, while delivering high standards for debt deals, making it IFR Asia’s ESG House of the Year.

Debt used to be the main focus of ESG finance, but BNP Paribas was well placed to take advantage of equity investor interest in companies that produce materials used in EV batteries.

“We go beyond the bond and loan market,” said Chaoni Huang, head of sustainable capital markets for global markets in Asia Pacific. “This year we spent a lot of time on our ECM team.”

The bank was joint sponsor and global coordinator for the HK$4.24bn (US$544m) IPO of JL Mag Rare Earth, a Chinese producer of high-performance rare earth permanent magnets, and then JGC for miner Tianqi Lithium’s HK$13.4bn listing, one of the biggest offerings in Hong Kong last year.

“We are looking for clients in the EV space all the way from upstream to ride-hailing companies,” said Shilpa Gulrajani, head of corporate development and sustainability for Asia Pacific. “This could cover labelled transactions or M&A.”

Of course, there were opportunities for ESG debt financing around the EV sector too. BNP Paribas joined Geely Automobile Holdings’ US$400m three-year sustainable club loan, the first major financing under its new sustainable finance framework, as Geely shifts focus away from petrol-powered vehicles.

The bank was also a joint bookrunner as South Korea’s LG Chem, which produces petrochemicals, batteries and materials used in the IT and automobile industries, brought a US$1bn dual-tranche green bond.

Elsewhere, BNP Paribas acted as joint sustainability coordinator for Reliance Rail PPP’s A$1.8bn (US$1.3bn at the time) 21-year loan, which combined green and sustainability-linked features, and achieved one of the longest tenor for an Australian project financing. The interest margin will decrease if the issuer hits its ESG targets, but the structure requires the passenger rail operator to reinvest any savings in funding sustainability improvements.

The tech industry, too, proved fertile ground for BNP Paribas this year, as it led debut deals for some of China’s biggest names.

It lent to fintech giant Ant Group for the first sustainability-linked loan in the Chinese tech sector, with a mechanism that could increase or decrease the margin depending on whether Ant meets ESG targets.

When Alibaba Group Holding brought its first green club loan to fund a new global headquarters, BNP was green finance coordinator and MLAB for the Rmb3bn (US$472m at the time) five-year transaction.

The bank was sole green structuring adviser for Lenovo’s green finance framework, and helped bring the computer manufacturer’s debut green offering, a US$625m 10-year tranche in a US$1.25bn two-part trade.

BNP Paribas ensured it maintained high standards throughout.

“Investors don’t want to invest in a green bond that’s weaker than a green bond from another part of the world,” said Huang. “We use our leadership in ESG finance committees to lead harmonisation of standards.”

Notably BNP Paribas was joint bookrunner for South Korea’s first bonds to be certified by the Climate Bonds Initiative, attracting dark green investors to Shinhan Bank’s US$500m 10-year Tier 2 climate bond, which refinanced debt for urban rail projects.

The bank was a bookrunner when Bank of China Frankfurt branch brought a US$500m three-year green bond, the first to be aligned with China’s updated Common Ground Taxonomy, released in June.

BNP Paribas did not focus solely on issuers. It arranged the first SLL for an Asian private equity firm, a three-year transaction for Hong Kong-headquartered PAG. The interest rate will step down if PAG meets certain targets, including promoting emission reductions and gender diversity at portfolio companies.

BNP Paribas’ tough approach has often meant rejecting business from clients who were not able to make a meaningful commitment to reducing their carbon emissions.

“A cement company in Asia wanted to chalk out its ESG strategy but in our view wasn’t ready for a labelled transaction at the time,” said Gulrajani. “They went with another bank and began work on a transaction. We kept the dialogue open and when we supported their next one, they had the right things in place.”

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