A distinctive interest rate derivative linked to ESG targets for Lucart
After the financing granted to Lucart in recent months, backed by SACE Green Guarantee and linked to the achievement of specific objectives related to sustainability and circular economy, Intesa Sanpaolo's IMI Corporate & Investment Banking Division has come up with an innovative contract to hedge the risk of an increase in the rate to which the financing is indexed.
This is a distinctive structure as it differs from the more common ESG-linked derivatives, which traditionally provide for a reduction, or an increase, of the fixed rate of the hedging instrument depending on whether or not the ESG targets are reached.
Thanks to this instrument, in fact, the company's virtuous sustainable behaviour is rewarded: the conditions of the derivative improve when the sustainability targets linked to the financing are reached, while, if the predefined ESG targets are not reached, Lucart commits to donate annually to a non-profit organisation or association engaged in social and sustainable projects or initiatives consistent with its sustainability policies.
This tool provides a double social value and triggers a virtuous circle: Lucart is stimulated to achieve its sustainability targets in return for an improvement in the conditions of the derivative if the predefined ESG targets are met, while it commits to make a donation to a non-profit organisation if those same targets are not met.