Transition loan gives businesses one more reason to embrace sustainability

ABN AMRO wants to encourage sustainable business practices and is keen to engage with its clients to explore their options. Mascha Boender, a Corporate Bank Sustainability Domain expert with ABN AMRO, says, “We sit down with the client to find out which sustainability goal will have the greatest impact based on a list of standardised sustainability KPIs (key performance indicators) taking into account the relevant business and sector. Suppose a client scores well in terms of taking on individuals with poor job prospects, yet has a large carbon footprint. In that case, we would obviously choose to try to bring down those emissions, since that’s where we can make the most progress.”

Transition loan

“We agree annual targets for meeting the sustainability goal over a three-year period. Each year, a qualified external assessor – such as a certifying body or auditor – evaluates the client’s performance in relation to their sustainability goal. If they meet their target, they’re granted an interest rate reduction of 0.30% starting the following year. If not, an interest surcharge of 0.15% is levied instead. That way, there’s always a real incentive to take the necessary steps. If the term of the loan exceeds four years, the standard interest rate will apply after that time."

Sustainability goals

“We’ve developed climate, circular and social sustainability goals using generic KPIs applicable across all sectors, as well as sector-specific KPIs. Generic KPIs may involve anything from a reduction in grey energy consumption to the participation of vulnerable groups in the labour market or making vehicle fleets more sustainable. Examples of sector-specific KPIs are fighting food waste and increasing the volume share of plant proteins.”

SMEs

Karianne Tieleman, head of Corporate Bank Sustainability Expertise at ABN AMRO, says, “We modelled the transition loan on sustainability-linked loans. We’ve made similar financing packages available to our corporate clients for some time, but with the transition loan we’re broadening the scope of eligible companies, particularly SMEs. Transition loans are available to clients who need anywhere from 1 million euros to 25 million euros in financing.”

“We try to align sustainability goals as closely as we can with key developments in a given sector. Targets should be more ambitious than laws or regulations, but they still have to be realistic and achievable. We also intend to periodically revise and refine sustainability goals.”

Starting point

“Targets are set based on where the client currently is in terms of sustainability, thereby ensuring that the product is suited to businesses that haven’t taken much action to make their operations more sustainable and to those who have already made considerable strides. We enlist external qualified assessors to determine whether clients have achieved the targets agreed.”

No matter where a client is on their sustainability journey, the new transition loan ensures they can make measurable progress and gives businesses one more reason to embrace sustainability. Besides resulting in a more positive impact on society and making the most of developments in sustainability, the loan can help businesses save money. It’s yet another way ABN AMRO is motivating its clients to take the next step to becoming more sustainable.