Six years ago around 200 global leaders signed the Paris Climate Agreement, binding their countries to the transition to a lower carbon economy by phasing out fossil fuel subsidies and pledging to limit the global average temperature increase to a maximum of 2 degrees Celsius above pre-industrial times. In Europe alone, the EUs’ national energy and climate plans (NECPs) for 2021 to 2030 have committed to achieve a 32% share of renewable energy by 2030.
Certainly, these targets are both commendable and necessary. However, considering amongst other important parameters the current role renewable energy plays in global energy generation, are they actually achievable? The answer is simple - financing and investing in renewable energy need to be significantly boosted if countries across the globe are to meet these targets.
According to the UN’s Global Sustainable Development Report, rising incomes, a growing population and increased urbanisation in both developing and developed countries mean that the demand for energy is expected to rise by 25% in 2040. The International Energy Agency (IEA) has concluded that to reach net zero emissions by 2050, annual investments in renewables will need to more than triple by 2030. The increasing number of countries that have pledged to achieve net-zero emissions nowadays covers around 70% of global emissions of CO2 however, even if successfully fulfilled, the pledges to date would still leave around 22 billion tons of CO2 emissions worldwide in 2050.
Without a doubt, more needs to be done. Boosting renewable energy investment can no longer be a matter of choice for institutions, governments and corporations - it is the only way forward towards a more sustainable future. Covid-19 has shown that business models with unsustainable practices may be at a disadvantage in the long-term, and customers will now be expecting the highest levels of social responsibility on behalf of corporations, governments and institutions. The EU is clear about the path and has allocated €1.8 trillion to rebuild a resilient and greener post-Covid-19 Europe.
A large number of banks are increasingly responding to both social and investor regulatory demands for more sustainable financing, with ESG statements often coming from the most senior levels of the organization. Nevertheless, a distinction must be made between merely commenting on the importance of sustainability in banking and implementing measures that will actually contribute to bringing about tangible change to the environment and society. In that sense, Banco Santander has committed to raise, finance and mobilize EUR 120bn of Green Finance by 2025 and EUR 220bn by 2030 – and Santander CIB has been one of the main contributors to the EUR 33.8bn raised, financed and mobilized in 2019 and 2020.
Moreover, a genuine commitment to improving the environment requires a complete transformation of a bank’s culture and offering; that is why Santander CIB has put sustainability at the heart of its corporate strategy, in particular through the recent creation of the ESG Solutions team, headed by Steffen Kram. This new unit is helping our clients to understand the implications of the decarbonization of the economy, assess the impacts on their business models, and more importantly, propose them tailored-made solutions and products to accompany them throughout this journey.
Since last year, Santander CIB has reached several milestones in its sustainability agenda by actively contributing to the reopening of the European market with the issuance of several green bonds in Italy, also with the recent financing of an Offshore Wind Farm which will become the largest windfarm globally, the first ESG corporate finance advisory role in Hydrogen for an industrial player or with the closing of one of the largest ever sustainability linked Revolving Credit Facility (RCF) and the first syndicated facility of its kind among publicly listed companies in the beverage sector.
Santander CIB finished 2020 as the top financier of renewable projects globally and in our core geographies such as in Spain, both in terms of volume of financing and number of transactions, according to Dealogic. As such, we have helped to finance 13.765MW of new renewables energy capacity in the World in 2020, from 8.036MW in 2019.
The geographic reach of Santander’s financing of renewable energy projects is vast, ranging from, amongst other projects, photovoltaic plants, wind farms, and thermosolar and hydraulic power plants in the United Kingdom, the United States, Brazil, Belgium, Spain, Chile or Uruguay, to name a few. Those sustained efforts that have led us to be the leading international entity in the financing of renewable energy projects according to Dealogic are perfectly complemented in the project bond market (in particular in Spain) or in the debt advisory space, in which Santander CIB is one of the most active players in areas such as the Offshore Wind market, with several mandates in execution in Europe, US and Asia. Santander CIB is also at the forefront of the technological evolution of the sector, for example through our first mandate in floating Offshore Wind business. During 2020 SCIB acted as Sustainability Bond Structuring Agent and bookrunner in Banco Continental de Paraguay’s inaugural USD 300 million Sustainability Bond. This transaction was the first sustainable bond by a Latin American financial institution with an international distribution. Moreover, Environmental Finance named SCIB as Lead Manager of the Year for its role as bookrunner on the Republic of Chile’s CLP 1.6 trillion (USD 2.1 billion) social bonds. The notes were notable for being the largest single sovereign social bond issue in 202 and the first ESG bond issued in local currency by a Latin American sovereign.
In 2020, we participated in 59 Green and ESG loan transactions globally, and ranked third in Refinitiv's league table. Santander CIB’s close alignment with large institutions and entities committed to sustainable growth is an important element in our approach to renewables financing. Working in cooperation with multilateral entities, such as the European Investment Bank, the Council of Europe Development Bank (CEB), one of the main development banks in Latin America (CAF) or the European Bank for Reconstruction and Development (EBRD), Santander CIB offers its clients solutions for energy efficiency and renewable projects globally.
In line with the UN’s sustainable development goals, it is now critical for corporations to reassess their sustainable corporate strategy if they are to actively contribute to a lower carbon economy. Although sustainable financing is increasingly growing, it is only through active and sustained financing of renewable energy projects that the climate action goals outlined in the Paris Climate Agreement can be made a reality.