Transition loan rewards sustainable businesses with lower interest rates

A growing number of entrepreneurs are working to make their businesses more sustainable, and ABN AMRO’s strategic goal is to help its clients make the transition. The bank’s transition loan is intended to accelerate the shift, linking sustainability targets (KPIs) to the amount of interest due. If a business meets the relevant KPIs, as assessed by a qualified third party, the client is awarded an interest rate reduction. If not, an interest surcharge is levied, with all proceeds going to a good cause.

Supporting clients in the transition

The transition loan is an initiative of the Sustainable Finance Desk, which supports new and existing business clients in realising their sustainable and circular ambitions. In addition to financing new sustainable business models, advisers help find ways to make traditional business models more sustainable. The Sustainable Finance Desk also brings people and stakeholders together, both in and outside the bank, to accelerate the transition to sustainability.

“The transition loan is an unbeatable combination of one of our core businesses – financing – and our strategy to help clients become more sustainable,” says Hein Brekelmans, head of the Sustainable Finance Desk. “It truly represents what we stand for at ABN AMRO.”

A loan for SPAR

A pilot project kicked off with the first transition loan being granted to the Dutch supermarket chain SPAR in July 2021. Among the criteria established for the supermarket sector is a social impact KPI – the SSK seal of approval for socially responsible entrepreneurship awarded by the Dutch Super Supermarket Foundation. With a proven track record in this area, SPAR is creating more jobs for those with poor job prospects.

Martijn ten Berge, who runs the SPAR university concept and three SPAR city stores, says the transition loan was “the deciding factor” in joining forces with ABN AMRO: “The sustainability aspect of the deal absolutely reflects our goals – and the interest rate rebate is a nice bonus.”

“The loan has proved to be a great way to start important conversations,” adds Leila Jaspers of the Sustainable Finance Desk. “Our relationship managers can use it as an extra tool to bring sustainability to the attention of our clients – whether they’re interested in greening their business or getting involved in social impact. Plus we’re seeing that the loan really speaks to SME entrepreneurs. Sometimes, as was the case with SPAR, the transition loan can be that little extra incentive they need to achieve their sustainability goals.”

Financing for the future

In the pilot project phase, the bank granted nine transition loans. The transition loan is similar to the Sustainability-Linked Loan (SLL) for large corporate clients. Both tie interest rates to sustainability goals, but there’s one key difference, as Hein explains: “With SLLs, the KPIs are determined on an individual basis per client. In other words, it’s a tailor-made provision. For the transition loan, though, we’ve set all the targets for each sector and sub-sector together with our sector specialists.”

Leila points out that these loans are now available to businesses of all sizes, and that’s important: “The world of banking is undeniably moving in this direction. You might even say ‘to finance change, finance must change’.”

Impact Nation and De Groene 100

The Sustainable Finance Desk is also the driving force behind other sustainable initiatives at the bank. These include Impact Nation, a 100-day programme that uses innovation to help businesses take concrete steps towards adopting a more sustainable business model. The department is also a founding member of De Groene 100 (The Green 100), a group of 100 ABN AMRO employees with sustainability goals. They advise clients and colleagues on sustainable finance and help spread knowledge of sustainability throughout the bank. Having started out as De Groene 20 in late 2017, the group has since grown considerably.

Hein says, “Sustainability, circularity and social impact make so much sense. And we’re seeing more and more people arriving at that conclusion. Mechanisms like the transition loan should basically just be the norm, and fortunately, we’re moving in that direction. Businesses obviously want to be commercially successful, but they also want to make a positive impact on the world.”

Leila concludes, “The transition loan is conducive to both those things. And it’s helping us make the choice of sustainability that much more appealing, while supporting our clients in making a positive impact.”

Are you interested in a transition loan? Why not contact your relationship manager?