The Spanish bank will invest the proceeds invested from customers in companies that are considered sustainable based on certain criteria for inclusion, which will determine the green, social or sustainable nature of the investment.
BBVA has launched its first ever sustainable structured note in a move to expand its range of environmental, social and governance (ESG) products. Starting today (December 2), investors in Spain will be able to invest in the first structured sustainable financial products in the country.
“There is a growing number of investors aware of sustainability issues,” Juan Agudo (pictured), global head of internal networks sales at BBVA Global Markets, told SRP.
“On the one hand financial and investment are increasing the offering of sustainable products from a socially responsible and innovation perspective. On the other hand, there is growing demand for products committed to the environment or other social goals. In this context, the new financial products add diversification to the offer of sustainable investment products available to retail clients.”
The bank’s first sustainable structured play targeted at retail investors in Spain is a three-year note with 95% soft protection initial investment and a 0.80% coupon for this amount. The remaining five percent is not guaranteed upon maturity although the product will pay out an extra one percent annual coupon (on the five percent) if a certain condition is met. The return of five percent of the invested amount will depend on the performance of a basket of three securities featuring Siemens, Axa and Inditex – three companies comprised in the Dow Jones Sustainability Europe Index.
According to Agudo, the financial industry is going through a transformation with sustainable investing acting as a lever.
“At BBVA we have the ambition of pioneering sustainability providing our clients with an innovative product offering as demand for ESG products increases,” said Agudo, adding, “because this is an investment product, its success will be tied to the evolution of the underlying assets”.
“Regarding the traction of sustainable investing in the market, this will depend on the knowledge and awareness of the end client, as well as education and support provided by public and private entities.”
BBVA will provide investors in its ESG products on an annual basis and at maturity with a copy of the sustainability certificate - so that it is possible to demonstrate that the criteria determining the sustainability of the financial contract has been met, certified by the external auditor Vigeo Eiris. IN addition, the bank will provide the composition of the sustainable portfolio (in which the capital from the contract is invested), including the number of bond or stock issuances, as well as their industrial sector and location.
Sustainability framework
The launch of ‘green’ or sustainable products by the Spanish bank is now possible thanks to its sustainable transaction banking framework which offers a wide range of sustainable financial solutions.
The methodology designed by BBVA allows the bank to offer financial products that are connected to sustainability and are certified as green, social or sustainable, even if the funding is not allocated to projects that are directly linked to the United Nations Sustainable Development Goals (SDGs).
BBVA approved its Pledge 2025 commitment to the fight against climate change in 2018, and will allocate €100 billion to green financing, sustainable infrastructure, social entrepreneurship and financial inclusion by 2025. At the end of June 2018, the bank has already deployed €22 billion in sustainable finance.
The launch of the first sustainable investment product is part of the bank’s aspiration to have a sustainable alternative solution for all of its products – both for large corporations and institutions as well as for SMEs and individual customers.
Beyond structured products, BBVA has launched several products to the retail market in recent months, including a line of loans to promote green housing, loans for hybrid and electric vehicles (for individuals) and sustainable vehicle loans (for SMEs and the self-employed).
In addition, as part of its goal to minimize the potential negative environmental impact of its activity, BBVA has also committed to ensure that 70% of the energy consumed by the group in 2025 comes from renewable sources, and 100% by 2030.
The bank has also committed to reduce its CO2 emissions by 68% from 2015 levels, and has already cut 12,000 tons of CO2 emissions since 2015, the equivalent of the emissions from an area with around 10,000 homes.