2bn loan tied to ESG metrics


ESG Innovation: rate on Danone’s EUR2bn 5 year syndicated credit directly tied to ESG metrics. 2 components: i) B-Corps certified sales ii) Ratings based on a) Sustainalytics, b) Vigeo Eiris


Implications: single demonstration that ESG directly impacts cost of debt and —> weighted cost of capital and thus impacting firm value via discount rate.


12 bank* syndicate shows serious financial institutional backing (although risk to banks likely considered low)


Lends weight to notion of ESG ratings. Lends credibility to B-corps certification process.


Concentrates power in ratings and certification providers.


Critique: following the criticisms of Cary Krosinsky on fund ratings** this potentially emphasises backward looking tick box scores too strongly.  ESG ratings providers show low (but positive correlation) approx 0.3 in this study***


Counter: use of both B-corps impact methodology and two forms of ESG ratings, all independent (although question of who pays fees cf. standard bond credit ratings) reduces reliance of single interpretation.  Single company ratings different from portfolio scores.


Further implications: ESG and B-Corp supporters can argue ESG direct meaningful financial and cost of capital implications.  Critics can still invoke virtue signalling concerns.


Models for sustainable finance are still developing (cf. green bonds) but if genuine incentives exist and those incentives credibly encourage long-term sustainable strategies then long-termism supporters should be enthused.


Of note: MSCI is not used as one of the ESG rating providers. Some observers might suggest this shows the French/Euroland strength of Vigeo Eiris over MSCI



*Bank syndicate (Best of my belief):  BNP Paribas,  Societe Generale, Credit Agricole, Natixis, HSBC, Citibank, JPMorgan, Barclays, ING, NatWest, MUFG and Santander.


Link to Danone Statement:

**Cary Krosinsky: Failure of Fund Sustainability ratings

*** Chatteji et al.  (2014).  Do [ESG/CSR] Ratings Converge