Rabobank has partnered with Sustainalytics for the new product — the snappily titled “ESG leader money market commercial paper programme” — which will offer debt instruments with maturities from one to 364 days.
The short tenors of commercial paper products mean that the funds will not be used for specific products, as is the case with longer-term traditional green bonds. Instead, the ESG label reflects the fact that Rabobank is a “leader” in Sustainalytics’s ESG rankings, those firms that rank in the top 5%. Rabobank is ranked sixth for sustainability, meaning it is in the top 1%.
Rabobank printed €1.2bn of four, five and six month paper on August 9, settling on August 10. A Rabobank DCM official said: “We were able to print the deal 2bp inside our curve, which is already well established from our usual programme.”
The documentation of the programme specifically mentions the Sustainalytics ranking, meaning that the issuer will not be able to make use of the new programme if it falls out of the top 5%.
“On the road with investors, it’s clear there was a lot of demand for a short-term SRI product,” said the DCM banker. “Asset managers are under pressure, particularly from pension funds in the Netherlands, to invest in ESG paper, so we created a product to meet this demand.”
Some supranational borrowers have expressed an interest in creating a similar product for longer-term debt. Since their projects are typically in alignment with the sustainable development goals, and since they often report exhaustively on the impact of their projects, some multi-laterals feel that all of their bonds should be thought of as SRI investments.
The project was inspired by the Philips revolving credit facility. Philips launched a green RCF through which its success or failure in certain key performance indicators is reflected in its cost of funds. The format has since become popular in the green loans market.