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Sustainability Linked Bond: a financial product to accelerate the transition

In 2021, as NATIVA we supported financial institutions in equipping their offerings with innovative products that integrate environmental and social aspects and supported beneficiary companies in accessing these types of products. In 2020 Larry Fink, CEO and Chairman of BlackRock, wrote to companies in which the fund participated, “Without a Vocation, no company, public or […]

In 2021, as NATIVA we supported financial institutions in equipping their offerings with innovative products that integrate environmental and social aspects and supported beneficiary companies in accessing these types of products.

In 2020 Larry Fink, CEO and Chairman of BlackRock, wrote to companies in which the fund participated, “Without a Vocation, no company, public or private, can reach its full potential. And without a Vocation, its key stakeholders will cause it to lose its license to operate.” Fink simultaneously highlights opportunities and risks associated with sustainability: a company that is careful to pursue its Purpose achieves its greatest potential. Those who do not do so face the risk of losing their “license to operate,” seeing themselves excluded from the market by consumer choice or regulatory change.

An organization that pays attention to its sustainability performance benefits in terms of competitiveness and resilience through a lower cost of money: in addition to the many financial products offered by various lending institutions, which incentivize the use of capital to generate positive environmental or social impacts, products are emerging that reward companies that are committed to measuring and improving their impacts. As NATIVA, we have created a framework to support, as Sustainability Advisors, organizations that intend to issue bonds in defining ESG (Environmental, Social and Governance) indicators. The framework developed is aligned with the international principles drafted by the International Capital Market Association and leverages the verticality of the B Impact Assessment to ensure the robustness of the company’s analysis and the relevance of the KPIs identified to the sector and issuer specifics.

An example of this is the Sustainability-linked Bond issued by OVS in 2021, the first to be listed on the retail market in Italy and Ireland, whose Framework drafted with our support was positively evaluated by the Second Party Opinion conducted by Sustainalytics (Morningstar). The targets chosen cover CO2 emissions, whose reduction target was approved by the Science Based Target Initiative, and social and environmental practices implemented by suppliers.

There have been numerous Sustainability-linked Minibonds on which we have supported issuers (in all, issues over 50M€), helping them identify sustainability targets that govern bond costs. As a result, companies have initiated programs to measure and improve their performance; many of them have committed to becoming Benefit Corporations and completing the assessment for B Corp Certification.