IGTA Journal - Summer 2020

UK corporate to issue a green US private placement, with a £705.1m issuance in March 2018. “At the time, investors had relatively limited knowledge of concepts such as the green bond principles,” says Bolton. “There has de nitely been a noticeable change in the past six to 12 months – but not to the extent that investors are bringing multiple ESG analysts along to meetings.” DEMAND AND DRIVERS Demand is being driven by a number of di erent factors, including investors as well as the board, the workforce and the company’s customer base. “We see a lot of demand for green bond issues, especially from debt investors in Europe,” says Liu. “We see them becoming more focused on ESG, and we know it’s becoming an increasingly important part of their investment process.” He adds that certain investors have dedicated green bond portfolios, and investors are particularly keen to invest in green assets. “And on the equity side, I know the equity investor relations team gets a lot of questions around ESG as well.” “Investors are showing a lot more interest in green issues, with many keen to make greener investment choices,” adds Jay Joshi, treasurer of property investment and development business Derwent London. “I can’t remember the last time I went to an investor meeting where climate change and ESG weren’t on the agenda.” But demand isn’t just coming from investors. As Liu explains: “The board cares; our equity investors care; and our stakeholders care. National Grid plays a very important part in the UK’s transition to net zero, so demonstrating our commitment to that is really important.” Another consideration is the role that green and sustainable nancing can play in improving a company’s reputation, and thereby increasing its appeal as a place of work – for both current and prospective employees. Bolton says, “Sta are interested. We have got a big commitment to what we call public value – it’s one of our strategic goals. And sta certainly buy into that.” Likewise, he says that prospective employees are taking a keen interest in the organisation’s environmental credentials: “We are attracting a lot of highly motivated graduates, and they are asking questions.” More broadly, customers are increasingly driving demand for evidence of organisations’ green credentials. “We have a customer arm that supplies electricity to B2B,” says Dukes. “We are the largest provider of renewable energy, and there’s a massive demand for that type of energy. People want green energy – they want to be able to say in their annual report and to all their stakeholders that all their energy is green.” She also points out that individuals are mandating investment managers to take on more green and ESG investments within their portfolios. GREEN AND SUSTAINABLE FINANCING IN ACTION Di erent companies will approach this area in di erent ways, whether their focus is on green revolving credit facilities (RCFs) or sustainable bonds. Drax, for example, was the rst global generator to issue an ESG-linked term loan. “The margin was adjusted based on 18 June/July 2020 treasurers.org/thetreasurer Customers are increasingly driving demand for evidence of organisations’ green credentials carbon intensity achieving a benchmark,” says Dukes. She adds that while the company has also been reviewing green loans and green bonds for some time, “given that we already had a strong ESG slant to both our core and working capital nance, we didn’t see green bonds as a compelling addition at this stage.” Joshi, meanwhile, says, “the property and construction sector has a large carbon footprint, so we have a responsibility to do what we can to reduce that.” In the case of Derwent London, this has included putting in place a ve-year, £450m RCF, which includes a £300m ‘green’ tranche – the rst such facility to be agreed within the UK’s real estate sector. “Lenders have a green agenda, too, and want to issue green products,” Joshi comments. “You’re e ectively pushing on open doors. If you go to your bank and want to talk about green nancing, it’s probably already on their agenda.” In January of this year, National Grid issued a €500m green bond, with the proceeds set to nance electricity transmission projects with environmental bene ts. “We went for green because it’s the most developed market,” Liu says, although he adds that the organisation is monitoring the market to see how di erent More companies are looking to invest in green finance IGTA eJournal | Summer 2020 | 42