Thames Water has signed an innovative £1.4 billion 5-year Revolving Credit Facility (RCF), with the interest rate linked to annual performance against Environmental, Social and Governance (ESG) metrics.
The agreement sees the company become the first UK corporate to tie the interest rate it will pay on the RCF to its Infrastructure GRESB score (Global Real Estate Sustainability Benchmark).
Outperforming the ESG benchmark will result in a lower interest rate, with any financial gains boosting Thames Water’s charitable fund. In 2017/18, the fund donated £103,395 to 21 charities and community groups across London and the Thames Valley, relating to water and the environment.
GRESB is an independent, external ESG benchmark which assesses the sustainability performance of real estate and infrastructure portfolios and assets worldwide. With a score of 86/100 in 2018 for infrastructure, Thames Water ranked 3rd in Europe out of 173 participants.
The new facility matures in 2023, with extension options to 2025, and will be used for general corporate purposes. It has been provided by a syndicate of 13 banks, co-ordinated by BNP Paribas.
Brandon Rennet, Thames Water’s Chief Financial Officer said: “Over the last two years we’ve set a new strategic direction to build trust in Thames Water as a responsible water and wastewater services provider. This facility closely follows the creation of our Green Bond Framework and underlines our commitment to sustainability and the pursuit of the UN Sustainable Development Goals. We’re delighted to have the support of our relationship banks as we do the right thing for our customers and the environment.”
Cecile Moitry, Director of Sustainable Finance and Investment at BNP Paribas CIB, said: “We are proud to support Thames Water in advancing its environmental and social objectives through this innovative transaction. It’s a tangible example of where financing can be aligned with positive impact incentives to encourage sustainable activities.”
During the last two years, Thames Water has seen a 51% change in ownership, appointed an independent Chairman and refreshed its Executive team. As part of its new approach, Thames Water is in the final stages of a major review of governance, with a Board restructure and the closure of its Cayman Islands subsidiaries almost complete. The UK’s biggest water and waste services provider launched its Green Bond Framework in January 2018 alongside a £705 million Green US Private Placement, and recently published its first ESG statement to increase disclosure around ESG metrics.