Credit Agricole has increased its commitment to sustainable development, establishing best practices and providing sustainable investments. In the first of a two-part article, following the launch of a new range of green structured products, SRP speaks to Tanguy Claquin (pictured), head of sustainable banking at the bank about the new offering and how the the green economy is shifting product allocation among investors, and becoming a mainstream investment.
The French bank has rolled out a sustainable product range based on two layers including green investments, for which the invested amount is earmarked exclusively for finance companies and projects playing a key role in energy transition, and green financial performance, where the financial return is structured to add exposure to a green equity index.
Sustainable investing became an 'intuition' for the bank around 10 years ago, according to Claquin. Since then, the bank has developed a framework across functions and business lines aimed at building up a product offering to address sustainability issues and support the shift towards a green economy. The sustainable banking unit has expanded over the last few years and now has dedicated team bankers in New York, Hong Kong and Paris.
The bank created a sustainable banking team with the idea of assisting its client base "in the transition and to work with them to develop sustainable solutions that would meet their financial and investment needs," according to Claquin.
"The Green Bond market was a starting point for us," said Claquin. "At the time, this segment was very small and activity was marginal, but it represented an opportunity to position ourselves. We have gone a long way since then and are now the leading arranger of green bonds for third parties globally."
In 2017, the French bank was the most active arranger of green and sustainable bonds, according to Claquin. "This is a very impressive achievement if you look at the global footprint of the bank," said Claquin. "Our mandate is to continue growing the business and integrate it across capital markets business lines including sales, trading and structuring with the aim of developing a comprehensive sustainable and green product offering hand in hand with our clients.
"We are a big debt house and we finance a significant amount of green and sustainable assets in infrastructure, energy, real state, and we have a wide portfolio of green projects," said Claquin. "There was no reason why we could not issue ourselves. It was only natural for the bank to issue and sell its own paper via green bonds."
Its first trade came in 2014, when issuing green bonds backed by a portfolio of prime loans held by the bank. Its first foray into the green bond market was aimed at proving it could be a significant player in this market. "For this, we had to define sustainable, or green standards and adapt our systems, but, since then, we have issued regularly and recorded all the information about the green qualities of the loans through our loan money trail system," said Claquin. The green bonds have mainly private placements.
The commitment to sustainable investing became evident one year before the COP 21 agreement in Paris, when the bank announced that it would allocate €40 billion to green financing. "Our commitment is to arrange €100m worth of sustainable and green financing transactions by 2020, and we are well on track to meet that goal," said Claquin. "We're committed to issue €2 billion worth of investments linked to sustainable assets and strategies, and we have already issued around €2 billion worth of investment products."
The industry has learned from past mistakes and the products on offer reflect that evolution. Green and sustainable investing is no longer about screening out some stocks and industry sectors but about a comprehensive consideration about the impact of business activities on the environment, according to Claquin. "The data available and the commitment from manufacturers to develop a truly green offering has added quality to the existing green offering," said Claquin. "SRI had a black box component that is no longer acceptable."
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