UPM signs for €750m sustainability-linked loan

The revolving credit facility has a five-year duration. Image: UPM

The margin of the loan, which was confirmed earlier this week, will alter based on UPM’s ability to deliver against its target to reduce fuel and electricity emissions by 65% by 2030, against a 2015 baseline.

UPM claims this target is in line with the Paris Agreement’s 1.5C trajectory, having been approved by the UN.

The loan’s margins are also linked to UPM’s long-term ambition to deliver net-positive biodiversity impacts across its owned and managed forests in Finland, totalling around half a million hectares. This aim does not have a hard deadline.

UPM states on its website that it has been operating a biodiversity programme since 1998. Its strategy centres around efficiency and high-quality wood; water use; habitat preservation; recreational and public forest use; and working with third-party certification providers.

The revolving credit facility has a five-year duration and two one-year extension options. It is being coordinated by BNP Paribas sustainability team and Finnish arm. BNP Paribas’ sustainability strategy notably commits it to align operations and investments with the Paris Agreement and the Sustainable Development Goals (SDGs), and to help ensure the carbon intensity of the global energy sector falls by 85% by 2040.

“Promoting biodiversity through finance is an essential lever in tackling the climate crisis,” BNP Paribas’ head for Finland Marjo Liukkonen Lazaro said.

“This transaction highlights the positive role of sustainable finance to link to progressive decarbonisation targets, which can jointly protect ecosystems.”

Financial incentives

In a bid to place responsibility for environmental improvements firmly at the feet of the C-suite, more and more businesses are turning to sustainability-linked financial products.

Beverage manufacturing giant Britvic, for example, recently signed for a £400m loan whereby it will pay lower margins if it delivers progress against its plastics, emissions and nutrition targets.

Similarly, the business trend towards linking executive pay to environmental delivery has accelerated in recent months. National Express, as part of a new commitment to transition to zero-carbon bus and coach fleets, recently began linking senior staff pay to decarbonisation. Oil and as majors including Repsol, BP and Eni have also transitioned to this payment model, as have Swiss mining giant Glencore and automaker Mercedes-Benz.

Nonetheless, recent research concluded that just 6% of UK chief executives have financial incentives and bonuses tied to environmental strategies and performance

Sarah George