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Best ESG Solution Highly Commended: Dürr AG

Published: Aug 2021

 

Photo of Christian Aue, VP Corporate Finance.

Christian Aue

VP Corporate Finance

Dürr AG is a global mechanical and plant engineering firm with extensive expertise in automation and digitalisation. The company, founded by Paul Dürr as a metal shop for roof flashing in Bad Cannstatt, Stuttgart in 1895, listed on the Frankfurt Stock Exchange in 1990. Today it runs 120 sites in 33 countries around the world under the Dürr, Schenck and HOMAG brands.

Dürr takes sustainable linked financing to Germany’s Schuldschein market

The challenge

Sustainability is a central component of the Dürr Group strategy and the company has played a leading role in tying its cost of financing to sustainable targets and raising awareness of ESG-linked products amongst investors.

The solution

In December 2020 Dürr AG issued its third sustainability oriented Schuldschein loan, cementing its ESG leadership in the German private debt market since it became the first ever corporate to issue a Schuldschein loan linked to sustainability targets in 2019. Dürr’s sustainability linked financing via a margin step-up and step-down mechanism linked to its ESG performance allows the company to anchor ESG in its financing strategy and align its cost of capital to internal targets. When the company meets (regularly reviewed) sustainability targets, it achieves a lower financing cost and investors benefit as the company’s sustainability performance improves. The rating, prepared by French ratings platform EcoVadis, takes into account key sustainability figures such as CO2 emissions and water consumption, but also aspects such as fair working relationships as well as conditions amongst the group’s suppliers.

Best practice and innovation

Dürr was the first company to sell the concept of a sustainability linked product to investors in the Schuldschein market when it sold debt comprising margin step-up and step-down features based on its ESG performance. The ensuing investor demand was so strong it has led many other corporates to follow suit. In other innovations, Dürr used an ESG linked interest rate swap, which was the first of its kind in Germany, to create the world’s first ESG linked convertible bond, underscoring a broad strategy designed to show that an ESG link is easily transferrable between different financial products with short lead times, and is not only accepted by banks but also investors in new market segments. Dürr AG has been able to prove investor demand for sustainability linked financing, and its use beyond bilateral and syndicated loans.

Key benefits

    • Dürr achieves a lower financing cost once ESG targets have been reached, thereby linking financing to the sustainability strategy of the group.
    • Issuing ESG-linked debt in the Schuldschein market has heightened the importance of sustainability within the company.
    • The process opened up new communication on the company’s sustainability performance with investors and banks.
    • It places the company at the forefront of meeting new investor requirements regarding sustainability ahead of the EU taxonomy.

“Dürr has been able to prove that besides green financing, sustainability linked financing is accepted by investors and can be utilised in other financial products besides bilateral and syndicated loans, contributing to the establishment of a new market segment,” says Christian Aue, VP Corporate Finance.

The Adam Smith Awards is the industry benchmark for best practice and innovation in corporate treasury. The 2021 Awards attracted a record-breaking 309 nominations spanning 40 countries. To find out more please visit: https://treasurytoday.com/adam-smith-awards.

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