Renewi connecting the circular economy with green finance
Renewi is a pure play sustainability-focused company at the heart of the emerging circular economy. Through its operations it processes 14 million tonnes of waste a year and recycles and recovers 90% of this, which preserves the natural resources that would otherwise be required and avoids the carbon emissions of the alternatives. The company is proud of its role in the circular economy and it is keen to invest in the growth of recycling and the positive environmental impact of doing so. It wanted to demonstrate this using a green finance framework consistent with the green bond and green loan principles.
Renewi converted its main €550m banking facilities into a green loan using a green finance framework. This framework applies to the whole company and not just specific projects and can be used for all future funding. It is based on green assets always being greater than green liabilities and therefore any debt raised has been deployed into green investments.
As an additional feature of the loan, the Group linked the margin of the loan to the ESG performance of the Group via five KPIs and a series of targets for each year of the loan.
“This provides an economic incentive to the company to continually increase our positive impact to the circular economy,” explains Adam Richford, Group Treasurer, Renewi.
Following the main facility, the Group issued a €25m green EUPP (European Private Placement) and €68m of green leases which support their investment in the latest emissions standard collections vehicles (Euro VI).
ING and ABN were the sustainability coordinators, Sustainalytics provided a second opinion. Ashurst and A&O were the company’s and banks’ legal counsels respectively. In addition to ING and ABN, BNP Paribas Fortis, HSBC, KBC and Rabobank were the lenders.
Best practice and innovation
Green framework – which uniquely evaluates the entire balance sheet and ensures that the green assets are always greater than the green debt. This enables the entire loan, including the revolving credit facility, which is constantly changing in utilisation, to be categorised as green. The framework also provides flexibility to be used for leases, EUPP and any other debt issuance in future.
Green scorecard – which links the pricing of the Group’s main banking facility to the performance of key CSR KPIs. Not unusually, the measures are unique to Renewi but also the mechanisms in the documentation were created from scratch and forms a benchmark for other green transactions. The KPI approach improves on the more tested ESG rating linked pricing approach.
Green EUPP – which is documented in the main banking facility as separate tranches. This enables the banks to retain majority control for future changes, and ensures alignment of common terms and definitions, as well as ensuring entirely consistent covenants and obligations throughout the life of the facility.
Green leasing – fund investments in Euro 6 trucks which are ‘best in class’ for reducing harmful exhaust pollutants and emissions. They will significantly improve the environmental impact of the company’s collection fleet to meet their CSR targets.
Supports the company’s focus on sustainability.
Provides a benchmark for other green funding.
Reinforces the importance of sustainable finance.
Strengthens connection between finance and CSR teams.
Introduced new CSR measures and targets.
Potentially significant savings if targets are met.
It is worth noting that since this winning entry was announced, Renewi’s latest CSR report confirms they beat the targets they had set across all five Green KPIs resulting in a lower cost of borrowing.
“The elements here are ground-breaking and exemplars for future green transactions and the development of the sustainable finance market. Some of the aspects that we introduced are now being used as a benchmark for further development by the LMA of the Green Loan Principles,” concludes Richford.