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Santander Bank Polska S.A. to provide Poland’s first ESG-linked corporate loan

Santander Bank Polska and Energa signed Poland’s first loan agreement linked to ESG (Environmental, Social and Governance) criteria, i.e. based on assessment of the borrower’s performance in the area of sustainable development and responsible business.

The agreement, signed by a syndicate of 5 banks, concerns a revolving credit facility (RCF). It expires in 2024 with an extension option to 2026. The loan margin will depend on the company’s performance in three areas of sustainable development: care for natural environment, social responsibility and corporate governance (ESG indicators). The ESG indicators will be verified on an annual basis by Vigeo Eiris (Moody’s group company) – an independent international rating agency specialised in ESG issues. In addition, the agreement prohibits the use of loan proceeds for coal power.

This is the first loan agreement in the Polish market with the financing terms and conditions closely linked to the borrower’s performance against environmental, social and governance criteria.  By introducing the ESG-linked financing model to Poland, Santander Bank Polska delivers on its responsible banking strategy as an institution which supports sustainable development initiatives in the Polish energy sector.

Santander is actively involved in supporting low-carbon transition of the Polish energy sector. Financing in the ESG-linked formula is an instrument that introduces measurable incentives for borrowers, but also makes them feel actually responsible for actions to improve their environmental and social profile.

Maciej Tarnawski, Managing Director of the Credit Markets Department in the Corporate and Investment Banking Division of Santander Bank Poland

ESG-linked is a new financing model that has been growing fast in recent years. In 2018, the global value of this market was USD 77.2 billion, 60% more compared to the previous year. In the first quarter of 2019, Santander Group participated in more than 70% of new ESG-linked financing transactions worldwide, becoming a leader among the institutions that provide lending in this model.

We are pleased that Santander Bank Polska is the first bank to launch this product in the Polish market. Drawing on our experience in other countries, we are confident that ESG-linked financing can add value to the financing structure of Polish firms from many sectors, interested in expanding the dialogue with financial partners to include social and environmental responsibility objectives.

Maciej Tarnawski

The mechanism of ESG-linked loans incentivises firms to invest in sustainable development by rewarding their performance in this area with favourable loan pricing, and penalising them with higher margins if they fail to meet the ESG objectives.

The companies’ obligations resulting from ESG financing related to sustainable development are analysed and evaluated by independent analytical agencies. The results of annual audits are the basis for banks to assess pricing to be applied for the borrower.

In the case of the agreement with Energa, the ESG auditor will be Vigeo Eiris, an international rating agency from the Moody’s group, specialising in the assessment of the integration of social, environmental and governance factors in companies around the world.

The agreement was signed in a syndicate with four other banks: CaixaBank, MUFG Bank, PKO BP and BGK.
Santander Bank Polska acts as a coordinator, agent and ESG agent in this transaction.