These impact loans that engage businesses

Can a loan highlight the company’s CSR policy? This is what FM Logistic hoped for, which manages stocks and transport for large groups (Carrefour, L’Oréal, etc.) by taking out an impact loan in January. For ten years, this family business located in Moselle (and which achieved 1.4 billion euros in turnover in 2020) has been investing to have its HQE (High Environmental Quality) buildings certified and to reduce its greenhouse gas emissions. Greenhouse. “We have started to think about a CSR approach also for financing. But we were too small for “green bonds”, explains Jean-Michel Dray, Chief Financial Officer. On the other hand, impact lending, traditional bank financing, was well suited. ” This financing solution, still little known, owes its name to the rules that govern the evolution of its interest rate: it is reduced if the company achieves previously defined CSR objectives along the way and can sometimes also be increased if it fails.

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FM Logistic thus borrowed 122 million euros over nine years from a pool of 9 banks, with LCL as arranger. The interest rate will be reduced by 10 points if the company increases the percentage of HQE buildings compared to the total warehouse space, further reduces greenhouse gases in storage (air conditioning, etc.) and maintains the gold rating which has already been assigned to it by the RSE rating agency EcoVadis. Otherwise, the rate is increased by 10 points. Success or failure is assessed every year “The quantified objectives were discussed with LCL, to be ambitious but attainable”, adds Jean-Michel Dray.

With this loan, the company’s ESG (environment, social, governance) policy gains credibility in the eyes of customers since it is recognized by third parties, which are rather reliable, if they are several banks. “It is also sacred: we cannot go back», Underlines the financial director. An important asset. If a few years ago the company’s environmental efforts did not fascinate customers, “Today, it is a criterion which comes into account in calls for tenders, in the same way as the price or the quality of service”, recalls Jean-Michel Dray.

A fundamental trend

At the other end of France, the Breton SME Lumibird, manufacturer of laser technologies for industry, science, medical equipment (126.7 million euros in turnover in 2020), also has chose impact financing “To promote the values ​​of the company”, says Pierre Vallalta, his financial advisor. This time, it is not a bank loan that has been taken out but a private placement in euros or Euro PP: it is a loan taken out directly from several investors, and not from banks. If the company succeeds in increasing the percentage of disabled people in its French teams and in creating jobs at its Lannion site (Côtes-d’Armor), the cost of this loan of 40 million euros will be reduced by approximately 5%.

The idea of ​​taking out such financing was suggested by MidCap, the brokerage firm that supported the company. “This impactful Euro PP is a form of recognition for the company: everyone has the power to change things, but not everyone does. We do! ”, insists Pierre Vallalta. At the same time, Lumibird took out traditional bank loans, without impact, for more than 100 million euros.

Like FM Logistic or Lumibird, a growing number of companies are eager to be tempted by these engaging loans which have a good image. “In 90% of the meetings on financing, our clients mention green loans, impact loans, CSR and ask us about the modalities to use them”, underlines Benoite Armand-Pieyre, account manager for companies in the French networks at Société Générale. “It’s a fundamental trend”, adds Sandrine Enguehard, responsible for impact structuring.

A commercial asset

With the CSR wave accentuated by the health crisis, banks expect to see these atypical loans take a lasting hold in the landscape, at least for loans of a sufficient amount, at least 15 million euros most often today. hui. They are therefore putting themselves in working order and developing their expertise on the subject. “In credit, margins are challenged and competition severe. Being able to offer impact loans constitutes a commercial advantage vis-à-vis the customers of medium and large companies ”, emphasizes Olivier Nicolas, director of the corporate market at LCL.

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According to him, impact loans could represent 10% to 20% of the market within a few years. “Companies, more and more expected on their CSR trajectory, will feel obliged to provide proof of their commitments, he adds. This solution is therefore of interest to companies already engaged in a CSR approach, but also to those who are starting to think about it, seeing it as an opportunity to initiate it. ”

It does not matter, therefore, for the moment, that the profitability of these loans is often a little lower. “They are more time consuming since it is also necessary to set and control CSR objectives, recalls Matthias Kuntz, senior advisor at MidCap Partners and chairman of the financing consultancy firm Fundamental Partners. The impact loan finds an echo with certain leaders, and with the younger generations. But investors do not earn more. ” This explains the modesty of the discounts granted today by financiers in exchange for the CSR efforts of borrowers. “Too much loss of earnings would discourage them from participating”, Matthias Kuntz believes.

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