Green, Social & Sustainability Bonds
Green, social and sustainability bonds offer the same characteristics as a standard bond while ensuring that the funds raised are exclusively intended for the financing of projects or assets with an environmental and / or social benefits. Investors thus benefit from a reporting of the environmental and / or social impacts of their investment.
The Sustainable Banking team has been a driving force for the creation and development of the sustainable bonds market and continues to promote its most important innovations. In particular, the team was part of the consortium of banks who initiated the Green, Social and Sustainability Bond Principles, which promote the transparency and integrity of the market. Crédit Agricole CIB is a member of the Green Principles' Executive Committee and is represented at its Steering Committee.
Since 2012, Crédit Agricole CIB has been among the world’s leaders when it comes to structuring and investing in green, social and sustainability bonds. The Bank has taken part in major transactions for issuers such as the International Finance Corporation (IFC - a development institution of the World Bank), Asian Development Bank, Industrial and Commercial Bank of China (ICBC), Korea Development Bank, Unédic, Agence France Trésor, Île-de-France, SNCF Réseau, EDF and ENGIE. Crédit Agricole CIB also acted as sole structuring advisor on the Federal Republic of Germany's inaugural Green Bond Frameworks in August 2020.
Crédit Agricole CIB also pioneered transactions promoting gender equality, ‘Gender Bonds’. Specifically, the Bank arranged two Gender Bonds with the Asian Development Bank and QBE Insurance Group in 2018.
The Sustainable Banking team took part in the implementation of Crédit Agricole CIB’s Green Notes issue in 2013, aimed at financing projects that contribute to the fight against climate change and the transition to a decarbonised economy.
The team also developed a rigorous methodology for selecting the green-certified assets supported, described in the Green Bond Framework which received a second positive opinion provided by Vigeo Eiris for its last update in 2018.
Crédit Agricole CIB’s Green Notes are based on four structuring aspects defined by the Green Bond Principles:
- Use of funds: the funds raised by Crédit Agricole CIB via the issue of Green Notes contribute to the refinancing of Crédit Agricole CIB’s portfolio of Green Loans, comprising loans to businesses and projects that demonstrate solid environmental and social performance and that belong to a key sector for the transition to a more environmentally friendly economy.
- Project assessment and selection process: projects and businesses are selected according to a strict methodology. Each counterparty of Crédit Agricole CIB’s portfolio is allocated an Environmental, Social and Governance (ESG) rating based on its relative performance within its sector. These ratings are established, for example, using the ESG ratings provided by an independent external service provider. Businesses eligible for the green portfolio must (i) participate in a key sector for the transition to a more environmentally friendly economy or for combating climate change and (ii) act as a role model in terms of performance within their field.
- Monitoring of the use of funds: the identification of loans included in the green portfolio and the monitoring of their amounts are incorporated within Crédit Agricole CIB’s electronic loan management system and supervised by a dedicated in-house team. This team ensures that the amount of the funds raised by Crédit Agricole CIB’s Green Notes and the amount of the green portfolio remain balanced at all times.
- Reporting: Crédit Agricole CIB publishes a biannual report on the use of funds. Pursuant to its confidentiality obligations to its clients, reporting is carried out based on anonymous examples of financed projects and businesses, highlighting the best environmental practices implemented by those financed projects and businesses. Crédit Agricole CIB’s auditors check that the procedure drawn up by Crédit Agricole CIB is followed and complies with the methodology established on an annual basis.
Green & Sustainability-Linked Loans
Green and Sustainability Linked Loans provide an efficient and concrete solution to match borrowers' sustainable strategy through the financing of a sustainable and green business, and through corporate ESG commitments:
- Green Loans are regular loans for which proceeds are earmarked to the financing of green investments.They are structured in line with the Green Loan Principles and Crédit Agricole S.A.'s Green Bond Framework, and contribute to the green asset pool of the Bank, which is refinanced in the green bond market.
- Sustainability Linked-Loans are financings granted for “general corporate purposes”, with a margin indexed to the ESG performance of the borrower. They are structured in line with the Sustainability-Linked Loan Principles.
These loans are subject to specific monitoring in the Bank's internal systems under the control of the Sustainable Banking team. They benefit from a favorable internal liquidity cost to help increase the share of environmental loans in the Bank's balance sheet.
Unlike Green, Social and Sustainability Bonds whose proceeds are used to finance specific green, social or sustainable investment projects, Sustainability-Linked Bonds are linked to the issuer’s overall sustainability strategy and progress. Typically, this translates into a structure where the coupon of the bond can vary depending on whether or not the issuer reaches some pre-defined sustainability performance targets.
The Italian energy company Enel paved the way in September 2019 with the world’s very first Sustainability-Linked Bond, for which Crédit Agricole CIB acted as joint bookrunner.
Shortly after, the Green Bond Principles Executive Committee established a working group, jointly coordinated by our Sustainable Banking team, to propose market guidance aligned with this innovative approach and, released the Sustainability-Linked Bonds Principles in June 2020.
GREEN ASSET-BACKED COMMERCIAL PAPER (ABCP) PROGRAM
Crédit Agricole CIB has developed a Green ABCP Program leveraging the Crédit Agricole Green Bond Framework (available below).
A Green ABCP Program Annex has been added to the Framework, providing further clarity around the application of the Framework and the four pillars of the Green Bond Principles.
GREEN TRADE AND EXPORT FINANCE
To support the green and social development of our customers’ international trades, Crédit Agricole CIB designed an innovative Green Trade and Export Finance product offer. Especially in 2020, Crédit Agricole CIB successfully structured the first Green Export Credit Agency (ECA) loan for the Kingdom of Saudi Arabia and enriched its green product catalogue with green guarantees.
Since its creation, the Sustainable Banking team has been working on impact investment projects aimed at combining financial profitability with a strong social and environmental impact. These objectives include for example the reduction of poverty, job creation in disadvantaged areas, and carbon footprint reduction.
For example, the Sustainable Banking team structured Livelihoods*, a voluntary carbon credit fund that works with rural communities in developing countries, and advised Lafarge on a micro-finance project dedicated to housing. Crédit Agricole CIB also recently structured a securitisation project for EDF / ZECI in Ivory Coast supporting the access to distributed energy in Africa.
*Livelihoods: The purpose of this fund is to improve the living conditions of rural populations in poor countries thanks to carbon financing. For example, one of the fund's projects involves financing the planting of fruit trees in rural African communities and the development of agro forestry. This makes it possible for the populations concerned to increase their income from food and also to stock carbon. The investors are compensated with carbon credits. The first contract will involve Danone, Crédit Agricole S.A., Schneider Electric and CDC Climat. The Sustainable Banking team has assisted with this project from the start and we are in discussions with many companies and institutional investors planning to join the fund.
First capital market appearance for Hamburger HOCHBAHN AG with an inaugural EUR 500mn Green Bond
Crédit Agricole CIB launches a new Green Investment Solution for Crédit Agricole Italia’s clients in Italy
Hong Kong prices second green bond, becoming a key sustainable finance issuer in Asia