BPCE issues €100 million of transition bonds, invested by AXA IM, to finance Natixis’ assets contributing to the energy transition
On behalf of AXA Group, AXA Investment Managers (AXA IM) is investing in €100 million of senior non-preferred transition bonds, contributing to the financing of energy transition assets. The bonds have a 10-year maturity and will pay a coupon of 0.55%. They will be listed on the Paris stock exchange.
Issued by BPCE, the proceeds of the transition bonds can be used to refinance Natixis’ assets, consisting of project and/or corporate loans from relevant sectors such as, potentially, transport, power, midstream gas, mining and metals, and building materials. The assets will be selected for their high emissions reduction potential as well as their contribution to a low carbon economy.
The transition bonds have two key innovative features. The selected portfolio includes:
- “Sustainability-linked” corporate loans integrating a credit margin adjustment linked to the achievement of key performance indicators (KPIs) related to the climate and the energy transition. This loan format is well suited to capture the holistic, dynamic and forward-looking dimensions of the corporate energy transition.
- Project loans selected based on Natixis’ in-house Green Weighting Factor methodology1, an innovative mechanism that links Natixis’ analytical capital allocation to the degree of climate and environmental performance of each financing, enabling it to actively manage and steer its balance sheet’s climate impact and transition strategy.
The proceeds of this transaction will be used to refinance energy transition assets such as:
- Project loans dedicated to metals (bauxite and copper) considered as enablers for low carbon technologies2;
- Project loans dedicated to electricity transmission and distribution assets contributing to the interconnection of countries with low-carbon-based electricity generation;
- A “sustainability-linked” loan to one of the leading global aluminium producers, supporting the company’s commitment to low carbon aluminium production and actual sale.
Following AXA IM’s call to action last year3, this transaction demonstrates its intention to play a leading role in the development of transition bonds. AXA IM and Natixis also co-chair the ICMA Climate Transition Finance Working Group, which aims to steer capital market participant debate and disclosure guidance when raising funds for climate transition-related purposes.
Marco Morelli, Executive Chairman at AXA Investment Managers, said: “Being a responsible investment manager is at the core of everything we do, and as such we are always keen to source sustainable and innovative investment opportunities. Our work with the AXA Group, and partners such as BPCE and Natixis, continues to show our commitment to this new asset class. The launch of this transition bond is another step forward in our strategy to support the transition of carbon-intensive industries into low carbon business models aligned with the objectives of the Paris Agreement, and we do hope that many more will be funded in future.”
Jean-François Lequoy, Group CFO, Deputy Chief Executive Officer of Groupe BPCE and Member of the Management Board in charge of Finance and Strategy, commented: “This innovative transition bond issuance, in cooperation with AXA Group and Natixis, is a further step in our strategic ambition for the Group to be a leading player of environmental transition and sustainable finance. In the very infancy of this new type of thematic sustainable financing instrument, this transaction represents a significant milestone in the development of transition bonds, reflecting market innovation and sector diversification.”
Alain Gallois, Global Head of Investment Banking, Corporate & Investment Banking at Natixis, added: “We are proud to have worked with AXA Group and AXA IM on the structuring of this innovative transition bond and, through it, to have demonstrated an additional tangible and client-driven use case for the Green Weighting Factor. This internal Natixis mechanism, that allocates capital across all Corporate & Investment Banking financing deals based on their climate and environmental impact, was a key element used to define the eligibility of transition assets in this bond.”
- For example: Electric Vehicles, Energy Storage, Power Generation, Clean Transportation. 57% of aluminium and 43% of copper produced are considered to be used in low carbon applications, considering an average 2017-2040 of low carbon use in a 2° C scenario.