George Duncan: Sustainable finance: a new way to save the world?
We don’t normally think of financial markets as a progressive agent for change. However, today, SSE has refinanced a £1.3bn Revolving Credit Facility (RCF) linked to sustainability criteria. That means that improving social and environmental performance by SSE will be rewarded – in lower financing costs – by our group of relationship banks providing the RCF.
A RCF is like an overdraft, it is a facility SSE can use to help ensure the smooth management of our funding requirements. SSE will usually look to the public bond markets and various other forms of borrowing to fund our capital projects and wider business, the RCF ensures SSE always has access to borrow money when needed.
Every few years or so, we renegotiate the facility with a group of ten banks for a new five-year period. This year, we are doing it differently. The new RCF announced today is linked to our sustainability performance. That means we have agreed to improve our score in an independently judged, ESG set of metrics (Environmental, Social and Governance). If we improve our score, then we will benefit from better ‘pricing’ and lower fees on the RCF.
This innovative form of sustainable financing has only recently been developed by the finance industry, as Banks look to provide solutions to help promote action to prevent climate change. SSE is one of the first UK Corporates to convert to an ESG linked RCF.
This isn’t the first time SSE has been at the forefront of sustainable finance. The RCF follows on from previous sustainable finance activities which involved the issuance of two green bonds, €600m in September 2017 and €650 in September 2018, which makes SSE the largest issuer of green bonds in the UK corporate sector.
This announcement comes a week after SSE launched its stretching new goals for 2030 in a bid to tackle climate change and support global goals for sustainable development. Four fundamental goals of our own, aligned to the UN Sustainable Develop Goals, were created and are directly linked to executive performance measures – putting sustainable development at the heart of SSE’s strategy and operations.
From the assets we build, to the way we finance operations, we’re committed to playing our part in the low carbon economy needed in the future.