Treasury Transitions To Green

When ING Bank and Dutch electronics giant Philips launched the first sustainability-linked loan in 2017, “banks asked us, ‘What are you doing?’” recalls Robert Spruijt, ING’s head of Sustainable Finance for Europe the Middle East and Africa (EMEA). Unlike a traditional green loan, the €1 billion (about $1.1 billion) revolving credit facility did not have to be used for environmental purposes. Instead, its pricing was tied to Sustainalytics’ sustainability rating for Philips: Better ratings meant cheaper loan terms.

“[Banks] didn’t fully embrace yet that sustainability could be linked to the interest margin of a financial product,” Spruijt adds.

Since that landmark transaction, sustainable debt finance has ballooned, surpassing $1.6 trillion in 2021, more than double its 2020 total, according to BloombergNEF. Some of the fastest growth was in benchmark–or target-linked instruments–like the Philips loan. In 2021, sustainability-linked loans and bonds for financial entities, utilities and consumer discretionary companies topped $530 billion–a 300% surge over 2020.

Published by Anita Hawser in Global Finance.