ESG: Thames Water puts its money where its mouth is
The utility’s sustainability performance will partly determine the cost of servicing its new bank credit line, with any savings going to charity.
In early December, UK water utility Thames Water became the first UK corporate to tie the interest rate it will pay on a revolving credit facility (RCF) to its score under the Global Real Estate Sustainability Benchmark (GRESB) for infrastructure.
The £1.4 billion revolver was arranged by BNP Paribas and runs until 2023 with the option of a two-year extension. If the firm outperforms its GRESB infrastructure score, the margin that it pays will be lowered and any financial gains put towards Thames Water’s charitable fund.
Tom Bolton, head of corporate finance at Thames Water, tells Euromoney that the firm is responding to investor demand.
“The feedback we have had from institutional investors is that they wanted to see increased reporting in the ESG [environmental, social and governance] area and to see that the business is buying into it on a cultural level,” he says.
The firm issued its debut green bond in March, a £705.1 million US private placement.
“The green bond was all about use of proceeds, but this is different because it has a pricing impact,” says Bolton.