Duke Realty Refinances $1.2B in Facility Linked to ESG Metrics
The facility lowers the REIT’s borrowing costs by 10 basis points from its prior facility.
Duke Realty Corp. has closed a refinancing of a $1.2 billion revolving credit facility that includes a reduction in borrowing costs if certain sustainability linked metrics are achieved each year. The logistics REIT’s amended and restated credit facility matures in March 2025.
The facility lowers the REIT’s borrowing costs by 10 basis points from its prior facility, according to CFO Mark Denien. “As a leader in green industrial project developments and corporate responsibility, we are also proud to incorporate a sustainability component to this credit facility,” he said in prepared remarks.
These emerging structures are different from green bonds, which have become increasingly popular.
Companies well know that sustainability leads to lower operating costs and increasingly, to bringing new investors on board. Now, though, a new trend is taking shape: lower borrowing costs are being secured by touting ESG creds.
Essentially, sustainability-linked bonds and loans link financing terms to borrowers meeting ESG targets, such as cutting carbon emissions. If they don’t meet the agreed upon goals, the financing terms increase.
This year, according to Marilyn Ceci, global head of ESG developed capital markets at JP Morgan, the market for sustainability-linked bonds could grow 20-fold to between $120 billion and $150 billion, Reuters recently reported.
“I get calls from investors more and more saying that they want more SLBs, they like the holistic approach, and they like the skin in the game,” Ceci told Reuters.
One example outside of the CRE realm is Schneider Electric, which last year issued a convertible bond that was linked to its ESG objectives, the Wall Street Journal reported. The company will have to pay investors extra if it fails to meet specific targets, such as having at least 30% of women on its leadership teams by 2025.
“It helps broaden our investor base,” Schneider Electric CFO Hilary Maxson told the WSJ. “It…makes it easier for institutional equity investors to find Schneider and also to invest in [the company] if there’s a positive rating.”