EU banking supervisor The European Banking Authority (EBA) announced the launch of a consultation on new proposed guidelines, setting out requirements for banks to identify, measure, manage and monitor ESG risks, including setting plans to address risks arising from the EU’s transition to a climate-neutral economy.

Requirements for banks under the proposed guidelines would include undertaking regular materiality assessments of ESG risks, ensuring the ability to identify risks through data processes and methodologies including exposure-based, portfolio-based and scenario-based approaches, and the integration of ESG risks in their regular risk management frameworks, with considerations of impact across risk categories including credit, market, operational, reputational, liquidity, business model, and concentration risks, across short-, medium-, and long-term time horizons.

The guidelines would also require institutions to develop Capital Requirement Directive-based (CRD) transition plans addressing risks arising from the climate transition and financial risks stemming from ESG factors and regulatory objectives.

According to the EBA, the new guidelines were developed in line with the regulator’s roadmap on sustainable finance. Launched in late 2022, the roadmap sets out the EBA’s priorities and plans in the areas of sustainable finance and in supporting and monitoring the integration of ESG risk considerations in the banking framework, through key objectives that include risk management and supervision, treatment of exposures, and ESG risk and sustainable finance monitoring.

Explaining the rationale behind the new guidelines, the EBA noted that despite actions taken over the past few years to manage the impacts of ESG factors, “several shortcomings have been observed in the inclusion of ESG risks in business strategies and risk management frameworks,” which the regulator said could “pose challenges to the safety and soundness of institutions as the EU transitions towards a more sustainable economy and ESG risks become increasingly substantiated or materialize.”

The guidelines also note a different approach relative to other sustainability-focused regulation such as the Corporate Sustainability Reporting Directive (CSRD) and the proposed Corporate Sustainability Due Diligence Directive (CSDDD), which focus on the compatibility of business models with the EU’s climate and sustainability objectives, while the EBA’s proposals focus instead on ensuring ESG risks are assessed and embedded in strategies and policies, rather than requiring banks to align with specific sustainability goals or transition pathways.

While specifying that the goal of setting up prudential plans “is not to force institutions to exit or divest from carbon intensive sectors,” the guidelines do aim to “stimulate institutions to proactively reflect on technological, business and behavioral changes driven by the sustainable transition,” including focusing on the related risks and opportunities, transition planning and engagement.

Click here to access the draft guidelines. The EBA consultation is scheduled to run until April 18.

Barclays announced today the establishment of a new Sustainable Banking Group within its Capital Markets business, bringing together the bank’s Sustainable Capital Markets and ESG Advisory teams, in a move aimed at addressing the sustainability needs of clients across industries.

According to Barclays, the newly formed business will combine its capabilities across M&A, Equity, Debt and Risk Management capabilities, offering clients with a tailored approach to coverage, advice and execution.

Travis Barnes, Global Co-Head of Capital Markets at Barclays, said:

“Combining the expertise of our superb sustainable capital markets team and ESG advisory businesses will enable us to better support clients’ ambitions to finance their sustainability and transition journeys.”

The new business will be led by Susan Barron and Cindy Quan, who have been appointed as Co-Heads of Sustainable Banking Group.

Barron has been with Barclays since 2010, most recently serving as Global Head of Sustainable Capital Markets. Quan joined the firm in 2023 from Goldman Sachs, and has been serving as Head of Americas ESG Advisory.

The establishment of the new business marks the latest in a series of moves by Barclays to expand its sustainable finance capabilities and teams, including the launch earlier this month of a new Energy Transition Group within its Corporate and Investment Bank. In 2022, Barclays announced a goal to facilitate $1 trillion of sustainable and transition financing between 2023 by the end of 2030. In July the company said that it has delivered over £87 billion ($112 billion) of green finance towards its goal to date.

Daniel Hanna, Global Head of Sustainable Finance at Barclays, said:

“We want to partner with our clients as they manage the opportunities and challenges of the transition to a low carbon future. Under Susan and Cindy’s leadership, we have created a single team that can work across all industries and our M&A, equity and debt capabilities. The combined teams will work closely with our newly formed Energy Transition Group and other teams such as Sustainable Project Finance to support clients to navigate market volatility and access the best solutions.”

Battery manufacturer Northvolt announced today that it has raised $5 billion through the largest-ever green loan in Europe, with proceeds from the financing aimed at expanding its Northern Sweden-based lithium-ion battery gigafactory and battery recycling facility.

The green loan was provided by a consortium including 23 commercial banks, in addition to the European Investment Bank (EIB) and the Nordic Investment Bank (NIB), who are both supported by the European Commission’s InvestEU programme, which mobilizes investment towards sustainable investment, innovation and job creation in Europe.

Alexander Hartman, CFO of Northvolt, said:

“This has been an incredible team effort, involving long due diligence processes, new partnerships with strong institutions, and developing cutting edge financing structures focused on sustainability – all to close one of the largest green financing deals in history.”

Founded in 2016, Stockholm, Sweden-based Northvolt was established with a goal to develop the “world’s greenest battery,” targeting a minimal carbon footprint, sustainable sourcing of raw materials and recycling. To date, the company has received $55 billion in orders from customers including BMW, Fluence, Scania, Volvo Cars and Volkswagen Group.

Northvolt is currently delivering batteries from its first gigafactory Northvolt Ett, in Skellefteå, Sweden, and the adjacent recycling plant Revolt Ett is approaching the conclusion of its commissioning and is already processing its first materials. According to the company, Revolt Ett recovers battery-grade metals with a carbon footprint 70% lower than mined raw materials.

The financing will be used to expand Northvolt Ett’s cathode production and cell manufacturing as well as the Revolt Ett plant.

Peter Carlsson, Co-Founder and CEO of Northvolt, said:

“This financing is a milestone for the European energy transition. It will enable us to realize the full potential of Northvolt Ett and demonstrates that circular, sustainable business practices are fundamental to success in today’s industry.”

Barclays announced the establishment of a new Energy Transition Group within its Corporate and Investment Bank, responsible for advising clients in the exploration of energy transition opportunities, and supporting clients on the path to net zero.

Comprised of industry sector specialists from within Barclays’ global Natural Resources, Power, and Sustainable and Impact Investment Banking teams, the new team will include expertise in a broad range of energy transition areas, ranging from hydrogen, carbon capture and renewables to nature-based solutions, renewable natural gas, and energy transition finance, according to the firm.

The new team will be led by Mike Cormier, who has been appointed as Global Head of the Energy Transition Group, reporting to Global Co-Heads of Investment Banking Cathal Deasy and Taylor Wright. Cormier takes on the new role after leading Barclays’ Energy business in the Americas since 2021.  

Wright said:

“The evolving landscape of banking, capital markets, and the impact on our clients is something that is central to our medium and long-term business strategy. As we adapt to lower carbon expectations and a more disrupted market landscape, this new team will be a critical part of us powering possibilities for clients and ensuring the best outcomes for their needs – and Mike is the best leader to drive this forward.” 

The establishment of the new team follows the launch by Barclays in 2022 a goal to facilitate $1 trillion of sustainable and transition financing between 2023 by the end of 2030. In July the company said that it has delivered over £87 billion ($112 billion) of green finance towards its goal to date.

Deasy said:

“At Barclays, we have long believed the energy transition will effectively re-shape how businesses and the world are thinking about the transition to net-zero. The creation of this new team is a natural evolution and further enables us to better serve as a lead advisor to clients in the energy and power sectors and presents a powerful One Barclays opportunity to drive value for shareholders.” 

Global energy and electricity provider Iberdrola announced a €300 million (USD$328 million) ESG-linked green loan from the World Bank, through its private sector investment arm, International Finance Corporation (IFC), aimed at funding renewables projects in countries that depend coal, including Morocco, Poland and Vietnam.

The new loan marks an expansion of the collaboration between Iberdrola and the World Bank launched last year to promote energy transition in emerging countries. At the time, a green loan linked to sustainability targets of $150 million was signed to finance digitalization and energy efficiency improvements in the electricity distribution networks operated by Iberdrola’s subsidiary in Brazil.

Alfonso Garcia Mora, IFC Vice President for Europe, Latin America and the Caribbean said:

“This loan is a significant step in the global IFC-Iberdrola Energy Transition Partnership, which aims to support Iberdrola’s expansion and re-entry into emerging markets that need to decarbonise their energy matrix.”

The new green loan follows the company’s announcement in 2021 of plans for its financing structure to have an increasingly higher percentage of green and sustainable products, estimated to account for nearly two-thirds of its debt by 2025. Iberdrola currently has almost €20 billion of outstanding green bonds, and more than 96% of its €20 billion credit line portfolio is now sustainability-linked. In December, Iberdrola announced a €5.3 billion credit line, its largest ever, with conditions linked to the company’s performance towards its climate and social goals.

The new ESG-linked loan is subject to meeting two strategic sustainability targets for Iberdrola, including its goal to reduce absolute direct and indirect greenhouse gas emissions across the company’s operations, customers and supply chains by more than 60% by 2030 compared to the 2020 baseline, and to more than double Iberdrola’s clean energy installed capacity by 2030, which at the end of the third quarter of 2023 exceeded 41,000 clean MW.

€170 million (USD$186 million) of the agreed amount has already been committed to finance onshore wind energy projects in Poland.

Iberdrola and the World Bank said that both institutions continue to analyze collaboration options to develop new clean energy projects in emerging countries, including offshore wind and green hydrogen generation.

José Sainz Armada, Iberdrola’s Director of Finance, Control and Corporate Development, said:

“This loan will allow Iberdrola to continue contributing to the energy transition, decarbonisation and electrification in developing countries – which are still highly dependent on fossil fuels. It also consolidates IFC as one of Iberdrola’s major allies in providing financing for renewable projects.”

Netherlands-based bank ABN AMRO announced today the appointment of Tanja Kramer as Head of the ABN AMRO Sustainable Impact Fund, with responsibilities including leadership of the fund as well as involvement in origination and execution activities.

Launched in 2021, the ABN AMRO Sustainable Impact Fund (SIF) makes direct investments in companies and early stage projects in key transition sectors, targeting key sustainability themes of circular economy, energy transition, and social impact. The fund has a commitment of €500 million, funded and managed by ABN AMRO.

Kramer joins the ABN AMRO SIF from Dutch venture capital investor Slingshot Ventures, where she served as a Partner, responsible for heading the investment team. Prior to joining Slingshot, Kramer held a series of senior finance roles, including serving as Head of Mergers and Acquisitions at KPN, and Director of Corporate Finance M&A at Royal Bank of Scotland, as well as serving at ABN AMRO as Assistant Director M&A.

In a social media post announcing the appointment, Kramer said:

“I am really excited to have joined the ABN AMRO Sustainable Impact Fund as of the beginning of this year! I am looking forward to working together with a great team and investing together in companies that have a positive impact on climate and society.”

Renewable energy infrastructure developer and operator Pattern Energy announced today that it has secured $11 billion in financing, consisting of a $8.8 billion in green loans and a $2.25 billion tax equity term loan facility, and that it has initiated construction on the SunZia Wind and Transmission projects, which the company described as “the largest clean energy infrastructure project in U.S. history.”

Founded in 2009, San Francisco-based Pattern Energy develops and operates wind, solar, transmission, and energy storage projects, with an operational portfolio of 35 facilities across the U.S., Canada, Japan and Mexico consisting of 6 GW of renewable energy capacity, and a 25 GW global development portfolio.

Located in central New Mexico, SunZia Wind is anticipated to generate over 3.5 GW of renewable energy, sufficient to power 1.2 million homes annually. SunZia Transmission will consist of a 525 mile high voltage direct current transmission line between New Mexico and south-central Arizona. The projects are expected to commence commercial operations in 2026.

Hunter Armistead, CEO of Pattern Energy, said:

“Our hope is this successful financing of the largest clean energy infrastructure project in American history serves as an example for other ambitious renewable infrastructure initiatives that are needed to accelerate our transition to a carbon free future.”

The green loan financing package includes an integrated construction loan and letter of credit facility, two separate term facilities, and an operating phase letter of credit facility and a holding company loan facility. Coordinating lead arrangers on the loans consisted a 15 North American, European and Japan-based banks, including BNP Paribas, Credit Agricole, Societe Generale, Wells Fargo and Sumitomo Mitsui Banking Corporation. The tax equity term loan facility was provided by Banco Santander and Santander Bank N.A. as joint coordinating lead arrangers, and with Bank of America, GE Vernova, Natixis and Royal Bank of Canada as joint lead arrangers. The financing also included a holding company facility to support initial equity capital for the project, provided by Nomura and CPP Investments.

Daniel Elkort, Executive Vice President at Pattern Energy, said:

“This financing is a testament to the commitment of our financing partners to the renewable energy space and to Pattern. The size and scale of both the SunZia project and this multifaceted financing show that the renewable energy space can secure attractive capital at levels previously only seen in traditional generation.”

Global energy and electricity provider Iberdrola announced today that it has signed a €5.3 billion credit line, its largest ever, with conditions linked to the company’s performance towards its climate and social goals.

Under the new sustainability-linked facility, signed with 33 international banks, rates on the credit line can be adjusted up or down annually based on Iberdrola’s delivery on two sustainability objectives, including its emissions reduction goals across the value chain, and its target to increase the percentage of women in relevant leadership positions in the company. Iberdrola has set goals to achieve carbon neutrality in its power generation plants by 2030, and to reach net zero across its full value chain by 2040, and to increase the presence of women in relevant positions to 35 % by 2030.

The new financing follows the company’s announcement in 2021 of plans for its financing structure to have an increasingly higher percentage of green and sustainable products, estimated to account for nearly two-thirds of its debt by 2025. Iberdrola currently has almost €20 billion of outstanding green bonds, and more than 96% of its €20 billion credit line portfolio is now sustainability-linked.

According to the company, its “ESG + F” initiative, integrating its sustainability and financing strategy, strengthens its €47 billion investment plan to support the decarbonization of the economy and move away from fossil fuels. Announced in November 2022, the 2023 – 2025 investment plan targets €17 billion for renewable energy, and €27 billion in its electricity networks, and a goal to boost renewable capacity to 52,000 MW by the end 2025.

Iberdrola said that it expects to update its investment plan in March 2024.

Ignacio Galán, Executive Chairman of Iberdrola, said:

“This credit line is yet another example of the financial community’s strong confidence in our strategy, based on value creation through investment in the energy transition and financial discipline. The transaction also enhances our commitment to our ESG goals.”

Amsterdam-based global bank ING announced today that it will phase out financing of upstream oil and gas activities, ending its lending for oil and gas exploration and production, by 2040, while setting a new target to triple financing for renewable power generation by 2025.

According to ING, the new commitments are aimed at building on the progress made at the UN COP 28 climate conference, which for the first time resulted in an international agreement to transition away from fossil fuels in order to reach net zero by 2050, and a call to triple renewable energy capacity globally by 2030.

ING CEO Steven van Rijswijk said:

“Climate change is one of the world’s biggest challenges. The world needs energy, but still too much of that is coming from fossil fuels. Building on the progress made by world leaders at the COP28 conference and the most recent scientific insights and scenarios, we’re today announcing our next impactful actions to contribute to the acceleration of the energy transition.”

As part of its plan to phase out upstream oil and gas financing, ING also announced a target to reduce loans to upstream oil and gas activities by 35% by 2030, which the bank said will result in a 50% reduction in absolute emissions financed linked to its upstream portfolio.

The new commitments mark a significant update ING’s “Terra approach,” its strategy to steer the most carbon-intensive parts of its portfolio towards reaching net zero by 2050. In March 2022, the bank announced that it will no longer provide new dedicated upstream finance for oil and gas fields, and earlier this year, ING introduced plans to introduce new funding restrictions targeting oil and gas infrastructure, and to reduce the volume of traded oil and gas financed in its Trade and Commodity Finance business.

The new renewables target would take the bank’s financing of renewable power generation to €7.5 billion annually by 2025, well ahead of its prior goal of a 50% increase by 2025 from the €1.5 billion base in 2021.

Noting that 80% of global energy utilization is still fossil fuel-based, ING stated that its energy policy aims to balance the key interests of decarbonization to address climate change while enabling energy to remains affordable for people and companies and ensuring a secure energy supply.

van Rijswijk added:

“We realise more work will be necessary by all parties to reach a net zero society. We will therefore continue to adapt our financing and policies, collaborating with clients, sector experts, scientists, regulators, and governments in addressing the urgency to transition to more sustainable ways of doing business.”

Tokyo-based banking and financial services company Mizuho announced a series of climate-focused initiatives, including introducing a new framework aimed at more actively supporting green projects for clients in high-risk areas in carbon-related sectors, and expanding its interim financed emissions reduction targets to the automotive and maritime transport sectors.

The new green project framework, forming part of Mizuho’s response policy for high-risk areas, follows the introduction early this year of a new transition support framework aimed at helping the company more proactively supply financing to support clients’ business structure transformation.

While the initial framework focused on enabling support for clients by verifying that their transition strategies met Mizuho’s credibility and transparency criteria, the update expands the framework to allow for more active support for projects that can be confirmed as “green projects.” Confirmation criteria to assess green projects include elements recommended through the Loan Market Association’s Green Loan Principles, and include use of loan proceeds, having a process to determine the eligibility of environmental targets and projects, management and tracking of loan proceeds, reporting and transparence, and the client’s policy for addressing transition risks.

Mizuho’s new financed emissions goals include targets to reduce Scope 1 and 2 emissions from the automotive sector by 38% by 2030 on a 2021 basis, and Scope 3 “use of sold products” emissions from the sector by 31% – 43%, and to achieve a climate alignment score of 0% or less, with the whole portfolio aligned with a decarbonization trajectory by 2030 for the maritime transport sector, focused on vessel operation, which accounts for the significant majority of the sector’s emissions footprint.

The firm has already set interim financed emissions reduction targets for the power, oil and gas, and thermal coal sectors. Mizuho stated that it also aims to set targets for the steel and real estate sectors this year, to be disclosed in early 2024.