In recent years, the number of companies that explicitly align their business targets with sustainability criteria has grown significantly. Following this mindset transformation, the use of sustainable finance instruments has equally seen a tremendous growth, with some banks and companies gaining recognition as first movers that support the continuous refinement of this developing market segment.
Establishing a Green Finance Framework
BASF SE, a longtime ING client and global leader in the chemical industry is operationalizing the corporate purpose "We create chemistry for a sustainable future" by integrating sustainability criteria into all key decision-making processes and management systems. The company sees sustainability as a driver of growth and at the same time as a tool for risk mitigation.
Since 2020, sustainability criteria have been established as relevant performance indicators in corporate management. Consequently, BASF has decided to integrate sustainability into its financing activities. At the beginning of 2020, BASF therefore introduced its own Green Finance Framework (GFF), in which the company was supported by ING as Sole Green Structuring Advisor. One major focus of the framework is the Sustainable Solution Steering method for the assessment of the sustainability profile of product solutions. More than 50,000 BASF solutions have been evaluated and classified according to their sustainability contributions. The goal of the method is to provide a comprehensible and consistent assessment of the sustainability performance of BASF’s products. Each product is assigned to one of four categories according to its sustainability impact (Accelerator, Performer, Transitioner, Challenged). Accelerator products are those that contribute positively to sustainability, whereas Challenger products do not fulfill the sustainability criteria sufficiently. Challenger products are therefore discontinued within five years of the initial assessment. It is BASF’s global goal to increase sales of accelerator products. This provides the basis for actively steering a portfolio towards a more sustainable profile and is also the key benchmark for the use of proceeds of the Green Bond.
Manufacturing and Sustainability
What is the most effective way to support companies in the context of such market developments?
Measures taken by industry leaders such as BASF can have a significant impact on the production of essential goods for society, in combination with a growing awareness of how to use the available resources most efficiently for this purpose. ING has established itself as one of the world's leading banks committed to being a thought leader and active player in the field of sustainability. ING played a central role in transferring BASF's sustainability strategy to a GFF, resulting in the successful placement of BASF's first green bond on May 29, 2020. This landmark transaction in the chemical sector was facilitated by ING as Active Bookrunner. The placement of bonds worth EUR 2 billion in two tranches - maturities of 3 and 7 years (green) - met with very strong investor interest. This enables BASF to further sharpen its long-term sustainable corporate profile also in its dialogue with capital market investors.
This transaction and cooperation provide strong evidence that when clients and banks cooperate in a trust-based relationship, they can actively contribute to the achievement of the 2-Degree objective of the Paris Climate Convention.