A group of major infrastructure lenders, including Aviva Investors, LGIM Real Assets, IFM Investors, Macquarie Asset Management, abrdn, BlackRock and Allianz Global Investors have developed an ESG Covenant Package, designed to develop a unified approach on ESG-related information and reporting requirements for infrastructure debt financings. The package is largely based on the EU’s Sustainable Finance Disclosure Regulation (SFDR), and focuses primarily on ESG reporting obligations.

According to the draft, the initiative has two key aims, including unifying ESG data collection by providing a consistent set of requirements as “best practice” for borrowers when reporting to lenders in respect of ESG matters, and facilitating lenders’ compliance with increasing ESG disclosure obligations, and with their own net zero obligations and investor demand.

Susannah Stock, Director Infrastructure Debt, Aviva Investors, said:

“The lack of consistent data in private debt is a well-known issue, which could hold back capital from flowing into a potentially high impact asset class. The advent of SFDR and the widespread adoption of TCFD means this has to change, and at pace. The ESG Covenant Package addresses a critical information gap and provides a best practice reporting template for ESG data at an infrastructure asset level, thereby satisfying disclosure requirements of lenders. We believe this reporting standardisation will benefit borrowers, whose shareholders will likely need to disclose the same ESG data, alongside asset managers and their investor clients who wish to understand the impact of their portfolios and, ultimately, end-savers.” 

The package is ultimately intended to be considered part of the term sheet negotiation stage for private markets debt deals in Europe, including financing for greenfield infrastructure construction, as well as for refinancing operational infrastructure.

The parties are welcoming feedback on the proposed covenants, with the response period open until the end of January.

Mary Nicholson, Head of Responsible Investment, Macquarie Asset Management, said:

“The ESG Covenant Package is a very welcome and important initiative which should benefit not only infrastructure borrowers and lenders but also broader stakeholders through improved transparency and standardisation.”

Jonathan Stevens, Head of European Infrastructure Debt at BlackRock, added:

“Collaboration and transparency are key to meeting increasing investor demand for sustainable investment opportunities. We are proud to be working alongside our industry peers to design a framework tailored for the Infrastructure Debt asset class which meets the increasing requirement for consistent ESG disclosure and would allow our clients to meet their own ESG commitments. This will be a first of its kind for the asset class, facilitating client access to and compliance with vital ESG reporting.”

Click here to view the ESG Covenant Package.