The market for green financing has been booming for several years now. This also applies to specialized products, such as sustainable Schuldschein. But what makes these instruments so special? And what are the advantages for corporate customers?
Basically, a distinction is made between a Green Schuldschein and an ESG/KPI-linked Schuldschein. The Green Schuldschein represents financing where the use of proceeds go towards a new or existing environmental-friendly project. In the case of an ESG-linked Schuldschein, the interest margin of the financing is linked either to the rating of an external sustainability agency or to the company's own KPIs. If the company's sustainability performance improves, so does the interest rate.
Market development
Since 2016, the issuance volume and number of sustainable Schuldschein transactions have steadily increased, both on the German market and internationally. In 2021 alone, the issuance volume of Green or ESG/KPI-linked Schuldschein nearly doubled year-on-year from 2.8 billion to 5.4 billion. A total of 22 sustainable Schuldschein transactions were issued in 2021, compared with 17 in 2020 and only 11 in 2019. The enormous interest in sustainable Schuldschein is also well illustrated by the oversubscription rate: since their market launch in 2016, Green or ESG-linked Schuldschein have often been oversubscribed, e.g., around 1.7 times in 2021. Even though it is not unusual for Schuldschein deals to get oversubscribed, this illustrates that Green and ESG-linked deals follow that behavior.
Also, in the first few years after its inception, the sustainable Schuldschein segment consisted of only Green Schuldschein deals only. This changed in 2019 when ING pioneered the first ever ESG-linked Schuldschein for Dürr.
Added value for customers
Customers benefit from this type of financing on several levels. Companies can rely on a long-standing and solid financing instrument and at the same time position themselves as a pioneer for more sustainability towards various stakeholders. Especially last few years have shown that investors are increasingly including sustainability aspects in their assessments. In addition, companies can benefit from a cost advantage in the case of an ESG-linked Schuldschein and link its sustainability strategy to its long-term financial strategy.
Strong partnerships
As a pioneer in green financing, ING can look back on many years of expertise in the field of sustainable Schuldschein transactions. Over the years, the Schuldschein team has arranged several Green (13), ESG-linked (11) and Social (1) Schuldschein deals for a diverse set of clients. ING is among the top arranger banks in the sustainable Schuldschein segment with accompanied transactions equivalent to a total volume of around €7.1 billion. Introducing sustainable financings to the Schuldschein market, ING assisted companies such as FrieslandCampina and TenneT in the Netherlands and, among others, Porsche, Mann+Hummel, Dürr, Schaeffler, PUMA, Ströer in Germany.