UniCredit and Italo, the private high-speed rail network operator, have signed an SDG-Linked Interest Rate Swap transaction, with which Italo has hedged the financial risks on a share of an SDG-linked syndicated bank loan for a total of 1.1 billion euros, adding a clause for the interest rate paid by the company to be reduced based on the results achieved on its sustainability objectives.
UniCredit acted as Global Coordinator for this SDG-Linked syndicated loan.
An SDG-Linked Interest Rate Swap is a transaction by which, in the same way as a traditional Interest Rate Swap, a company hedges the financial risks of a loan by converting the variable-rate interest on the debt into fixed-rate interest. It differs from a standard Interest Rate Swap in that the interest rate paid by the customer is directly linked to the achievement of one or more KPIs based on the sustainable development goals (SDGs). For example, keeping the volume of CO2 emissions below a predetermined level could periodically allow for a reduction in the interest rate paid to the bank.
Because of this, SDG-linked Interest Rate Swaps help to achieve two objectives, on one hand, the company removes the risk of increased financial costs in the event of an interest rate hike and, on the other, it is incentivised to operate in line with social responsibility criteria by pursuing sustainable development objectives.
Antonio Keglevich, Global Head of Sustainable Finance Advisory, UniCredit Corporate & Investment Banking, said: "Our commitment to supporting our customers across the board also includes supporting their sustainability and green efficiency goals. Our SDG linked solutions, from bonds to loans, now extend to hedging transactions, expanding the financial solutions available to companies transitioning to an increasingly aware approach on the environment and their local communities."