A more favourable interest rate in the case of a better sustainability rating – this is the basic condition of a new line of credit that the largest Czech energy company is opening with UniCredit Bank. For CEZ, this is the first-ever LOC tied to an ESG rating. CEZ Group recently ranked among the top 15 per cent of publicly traded companies globally in ESG and its ESG rating is continuously improving.
CEZ has its first line of credit tied to its ESG rating. If it improves its ESG rating over the next few years, it will get a better interest rate when drawing up credit, but if it gets worse, its interest rate will rise. The new line of credit from UniCredit Bank is for 7.5 billion koruna (approximately 315.8 million euros).
“For several years now, we have seen the importance of ESG parameters gradually growing in the global world of finance,” said Martin Novák, Member of the Board of Directors and Director of the Finance Division. “More and more banks require some form of reference to sustainability in their credit agreements. CEZ Group, like other leading European energy companies, is striving for the best possible ESG ratings so that it can access more favourable loans, credits and even insurance terms. Our achievements and progress in the area of sustainability are therefore not only a benefit for the climate but also a significant competitive advantage over companies that do not focus on this area as intensively as we do.”
Two years ago, the CEZ Group introduced its Clean Energy of Tomorrow business strategy based on ESG pillars. A key part of the environmental pillar is decarbonising the portfolio, reducing greenhouse gas emissions and other pollutants and achieving carbon neutrality by 2040. Last year, CEZ Group directed two-thirds of its total investments into activities that are in line with the European taxonomy.
“The line of credit with UniCredit belongs to our portfolio of committed backup lines of credit, and the reference to the ESG rating was chosen in view of the short horizon of the line of credit,” Mr Novák added. In this particular case, the credit parameters are based on the rating provided by a leading international ESG rating agency.
“The linking of loans and credits to ESG parameters has been emerging in the financial markets since around 2017 and since then, the number and volume of such loans and credits have been growing. Last year alone, we provided 11 billion koruna [approximately 463.2 million euros] in sustainability-linked loans within UniCredit Bank, which accounts for almost 20 per cent of the long-term investment loans in our corporate banking business. We are pleased to have been able to provide the bank’s highest ever ESG credit to our major client, CEZ,” added Slavomír Beňa, Member of the Board of Directors and Head of Corporate Banking at UniCredit Bank.
CEZ Group has made significant progress in its sustainability rating over the past two years. Last April, CEZ issued sustainability bonds, making it the first listed energy company in Central and Eastern Europe to do so. The bonds, worth 600 million euros have a coupon of 2.375 per cent and are linked to a commitment to reduce the intensity of emissions. The bonds will mature in or before 2027 and the key indicator will be the value of the emission intensity of energy production in 2025.
