Interest rate ratchets are not the only tool available to lenders who want to promote sustainable behaviour among borrowers.
In the recent €60 million refinancing of Italian gas network Societa Gasdotti Italia, which is owned by Ontario Teachers’ Pension Plan and Swiss Life, lender abrdn has applied an ESG covenant package. If the borrower fails to report on a number of ESG KPIs on an annual basis (including Scope 1-3 emissions, board gender diversity, and health and safety incident rates), this would constitute a default under the loan documents.
Abrdn told New Private Markets: “This is an implementation of the infrastructure debt ESG covenant package, developed by a group of institutional investors, including abrdn.”
Part of the proceeds of the refinancing will be used to upgrade the network in preparation for transportation of hydrogen (press release).