The 30-year Sterling Overnight Index Average (SONIA) linked interest rate swap transaction is believed to be the first SONIA-linked interest rate swap institutional repack transaction and the first institutional repack transaction to have sustainability-linked key performance indicators (KPIs) attached to it. The performance targets were subject to second party verification by ISS Corporate Solutions, to ensure they were both sufficiently material and ambitious in nature, whilst also remaining aligned to Loan Market Association sustainability-linked loan principles.
As part of the deal, a discount is offered to ABP on its hedging rate, provided that ABP meets certain sustainability-linked KPIs. These KPIs require ABP to achieve a significant reduction in its combined Scope 1 and Scope 2 emissions by 2030, building on the 36% reduction it has achieved in its absolute greenhouse gas emissions since 2014.
The agreement with ABP and BNP Paribas is the latest sustainability-linked financing Aviva Investors’ Real Assets business has invested in on behalf of Aviva UK Life, as it seeks to decarbonise its portfolio and transition to net zero by 2040. This transaction also highlights BNP Paribas’ commitment to innovating in sustainability-linked finance to support corporate and institutional clients.
As the UK’s leading ports group, ABP is committed to operating sustainably and supporting the decarbonisation of the wider UK economy. ABP continues to reduce its absolute carbon footprint through increased energy efficiency and investment in renewables. One of the largest corporate producers of solar energy, ABP is investing in solar and wind generation, and 17 of 21 ABP ports now have renewable energy generation projects providing clean power for the business, its customers, and the National Grid.
Marina Wyatt, Chief Financial Officer, Associated British Ports, said: “ABP recognises that it has an important role to play in helping the UK to reach net zero, and decarbonising our own operations is a vital part of this. We are proud to be partners for the first swap repack transaction with sustainability-linked key performance indicators, demonstrating our commitment to sustainability. We have reduced our absolute Greenhouse Gas Emissions by 36% since 2014, and this underlines our ambition to continuous improvement and even greater reductions in the future”.
Munawer Shafi, Head of Structured and Private Debt at Aviva Investors, said: “We are delighted to have completed this innovative transaction with ABP and BNPP. It further demonstrates our ability to incorporate sustainability considerations into bespoke transactions, while continuing to deliver the desired economic outcomes for all parties, as well as attractive risk-adjusted returns for our clients. We are committed to deploying capital to where it is needed to help our clients achieve their sustainability goals, and hope that this transaction will speed the adoption of ESG-linked transactions in the swap repack space.”
Matthew Ponsonby, Head of Global Banking, BNP Paribas UK explained: “Incentivising the net zero transition through finance can be a powerful mechanism to accelerate both the corporate and investor decarbonisation trajectory. This innovative transaction in a major sector like UK transportation highlights the value of sustainable finance extending into the derivatives market, whilst also demonstrating the need to support corporates such as ABP in holistically integrating transition targets into their financing needs”.
