Examples of ESG Products

Here are a few recent innovative ESG financial services products that have been created in recent years.

  • In September 2021, Goldman Sachs launched a ESG linked demand deposit account with Xylem (a global water technology) as its anchor client. The deposit account (which allows clients to access liquidity when they need it) links clients’ yield to the achievement of their ESG targets.

  • Carlyle Group has provided a variety of products that incorporate margin ratchets linked to ESG metrics. These include deals with:

    • Jeanologia (sponsor-backed financing with margin ratchet linked to water savings)

    • Logoplaste (term loan with margin ratchet linked to CO2 savings)

    • Acrotec (a “use of proceeds” margin ratchet than can be accessed for environmental performance initiatives)

  • There are several recent examples of green interest rate swaps, including:

    • A January 2020 Natixis structured IRS, linked to a 1.1 bullion euro loan to Italo – Nuovo Transporto Viaggiatorie, that provided incentives aligned with sustainable performance indicators established in the financing agreement.

    • A March 2020 HSBC structured IRS with Seimens Gamesa, where a positive change in the company’s ESG rating will prompt charitable giving by HSBC, while a negative change will prompt charitable giving by Seimens.

    • A November 2020 Credit Agricloe structured IRS with Goodman Interlink Limited, where Goodman’s fixed rate was linked to the green classification of the underlying facility.

  • In October 2021, Citi offered an inaugural $1 billion social finance bond supporting social focused developments in emerging markets – including a wide range of financial service, affordable housing, infrastructure, healthcare, and education projects.

  • In August 2019, ING developed a sustainability improvement derivative for SBM Offshore (a developer of floating production, storage and offloading vessels), which hedges the interest rate of a $1 billion credit facility by adding a positive or negative spread to the swap’s fixed rate based on SBM’s ESG performance.

  • In 2021, the World Bank executed numerous sustainability bonds, raising more than $12 billion, supporting “World Bank projects in developing countries which integrate climate considerations and developments to build greener, more sustainable economies.”

  • In November 2021, Teva issued a $5 billion sustainability-linked bond linked to: (1) a 25% reduction in scope 1 and 2 emissions, and (2) a 150% increase in access to essential medicines for patients in low/middle income countries by 2025.