... to corporate clients
SaaS-based service will allow banks to benefit from fast deployment of a highly flexible and comprehensive sustainability-linked lending solution designed in tandem with ESG lender banks
London, UK – March 9, 2023 – Finastra today announced the availability of its ESG Service, a cloud-native SaaS solution that streamlines sustainability-linked lending. Open and scalable, ESG Service facilitates the integration of sustainability performance target criteria into ESG pricing for both Finastra Loan IQ and other back-office systems in the market.
Sustainability-linked loans utilize complex pricing structures with multiple moving parts that need to be tracked against the sustainability targets outlined in the credit agreement. This can tie up resources and limit banks’ scope in terms of ESG product offerings and introduce risks associated with manual processes. Having an automated solution for managing the KPIs and ESG pricing changes of sustainability-linked loans enables banks to grow these lending portfolios efficiently at scale and minimizes the risks tied to manual processes.
Transaction volumes for sustainability-linked loans have increased considerably in recent years as part of a broader push towards ESG-focused financing. Following a record volume of ESG financing totaling $1.6 trillion in 2021, sustainable loan volumes held up in 2022 despite the challenging macroeconomic environment that saw reduced capital markets activity across asset classes.
“A shift in the mindset of corporate stakeholders, investors, customers and employees is pushing banks to adopt a more sustainable business model and this is driving demand for sustainability-linked loans,” explained Simon Thorogood, Senior Director, Corporate and Syndicated Lending, Finastra. “This creates a huge opportunity for banks to grow revenues and become leaders in the space, with borrowers looking for banks to help shepherd them through their ESG journey. Finastra’s ESG Service offers banks a well-defined, transparent and automated solution for managing ESG performance and the associated pricing adjustments, creating a more seamless experience for clients.”
“Furthermore, with complex and constantly-evolving ESG regulations on the horizon, having a centralized store of data will greatly aid banks in being able to efficiently and accurately meet their regulatory obligations in terms of meeting the relevant disclosure requirements.”
ESG Service is a dedicated application designed to support sustainability-linked loan pricing. As a cloud-native SaaS solution that uses open APIs, it provides a high degree of flexibility to support varied deal structures, and offers extensibility for inclusion of new capabilities and partner applications. It also has scope to add additional pricing components, beyond interest and ongoing fees, and the ability to support multiple transaction processing systems that require loan pricing adjustments.
By providing an automated means for tracking ESG performance and the related margin changes – which can be consumed directly in the relevant servicing systems via APIs – the service will deliver significant benefits to users across the middle and back office, including credit managers, borrowers and sustainability coordinators.
Find out more about Finastra’s ESG Service here.
Comments