Published on 19 March 2018

SUSTAINABLE FINANCE

Major French corporations link credit facilities to environmental and social performance

It's a small revolution that has been going on for a few months in the banking sector. A new tool is attempting to link credit facilities with environmental and social performance. Referred to as “impact credits”, these new tools already have a following in France. Danone has recently signed on, along with Bel Group and the French state-owned power company, EDF.

Taux de credit performance environnementale
Danone links €2 billion syndicated credit facility to environmental and social criteria.

Following green bonds, green credits or credit impacts, have now been introduced. These are credit lines that consider the environmental and social performance of the company. This is a revolution for the banking sector and a way to encourage more companies to transform themselves in a similar manner.

Danone announced in its annual report the introduction of ESG criteria (environmental, social and governance) in its syndicated €2 billion credit facility (which is contracted with several banks). Since 12 February, this credit facility now includes a credit line adjustment mechanism, reviewed at least once a year, whether up or down, based on the ESG criteria of the company that has been provided by third parties.

"We are thrilled to be a pioneer in combining both traditional financial and ESG criteria as drivers of long term sustainable performance, and for our banks to support this vision…and with our long-term commitment to create sustainable value for our shareholders and all our stakeholders", says Cécile Cabanis, Chief Financial Officer of the food giant.

Major corporations leading the way

Before Danone, Philips initiated this movement almost one year ago by negotiating an interest rate for a € 1 billion credit that is linked to the annual improvement of sustainable development objectives that are measured by an external agency. In France, EDF and Bel Groupe are also pioneers. The French energy company collected part of the cost of its deficit through its CSR performance.

Bel Group implemented the same system with its main line of credit. They have set three objectives for 2025: reduce greenhouse gas emissions, develop nutritional education programs in the group's key countries and deploy concrete actions for a sustainable dairy sector. In the event that they do not achieve these objectives, Bel Group will implement corrective measures through direct investments or by financing other associations.

Another innovation is the establishment of financing facilities for virtuous suppliers. In mid-2016, Puma, along with BNP Paribas, launched a financing program that aims to reward its suppliers’ compliance with social, health and environmental standards. The contractor lists them on a scale from A to D. Based on this ranking, discount commission rates are available, in favour of the highest-ranking suppliers. Initially, the program is being deployed in Bangladesh, Cambodia, China, Indonesia, Pakistan and Vietnam.

Concepcion Alvarez @conce1


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