ESG Channel, MAX CHEN
Banks see the merit of lending to socially responsible industries, offering cheaper loans that meet green investing targets.
Trafigura Group Pte. Ltd. and Gunvor Group, two of the world’s largest commodity traders, have lines of credit from banks that provide cheaper rates to finance reduced-carbon production of everything from oil to aluminum, the Wall Street Journal reports.
JPMorgan Chase & Co. also offers incentives to European energy giant Enel to meet certain environmental targets by the end of 2022. The lending agreement comes with a penalty if those targets aren’t hit.
Bankers and traders argue that the discounts help produce and deliver the raw materials that fuel the global economy in a more sustainable manner. This lending practice also helps banks meet their own green investing targets.
“There is an incredible hunger for clean assets,” Neha Coulon, global head of ESG solutions at JPMorgan Chase, told the WSJ. “At the end of every year, I saw ESG investing becoming more mainstream, but I wasn’t prepared for 2020 to be such a big year.”
In 2020, the financial market saw a boom in products aimed at improving the world while producing higher returns through socially responsible investments. The financial industry has had to ramp up its operations to meet this accelerating demand.
Muriel Schwab, Gunvor’s chief financial officer, pointed out that most banks have sustainability trading and finance teams now, a big change from just a few years prior when the commodity broker first started to link its loans to ESG targets.
“There was a clear acceleration of that trend in 2020,” Schwab told the WSJ. “Both banks and traders have come under pressure from shareholders, regulators, employees and society as consensus grows that climate change is a critical issue. If you don’t do anything about it, you are an irresponsible company.”
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