29/05/2023 - ABN Amro Bank NV: ABN AMRO’s Transition Loan encourages SMEs to take steps towards sustainability

Starting today, SME clients of ABN AMRO can take out a Transition Loan. With this new format for loans for 1 to 25 million euros, the interest rate is determined in part by the company's ability to achieve a sustainability goal that it determines together with the bank when first taking out the loan. The financing is similar to the Sustainability Linked Loan, ABN AMRO's successful loan format for amounts greater than 25 million euros.

Unlike other loan products, the Transition Loan involves arrangements between the bank and the company about a sustainability goal relating to a theme in the sector in which the company operates: reducing waste products, for example, or cutting back food waste. Targets to contribute to the sustainability goal give the company a clear point to work towards. The predetermined targets are reviewed annually, for a period of three years, by an external party or by the client's external auditor. Every year, they determine whether the company has achieved the annual target. If it has, the company's interest rate for the next year is reduced by 30 basis points. If the client fails to reach the target, however, the bank will add a 15 basis point markup for the next year. This means that the company's interest rate is either reduced or marked up every year, depending on whether or not the company has achieved the predetermined targets that are linked to its sustainability goal.

"ABN AMRO wants to assist its clients in making the transition, little by little, to more sustainable ways of running their business. The bank finances and advises a wide range of SMEs, so we have the opportunity to help them achieve that. The Transition Loan is intended as an extra boost for our clients to set this transition in motion: it uses financial incentives - an interest rate reduction or an interest rate mark-up - to encourage companies to achieve the predetermined targets," explains Karianne Tieleman, Manager of ABN AMRO's Sustainability Expertise Team. "We've had a lot of experience with this form of financing in recent years. The pilot was successful - and the feedback from business owners positive - so now we're ready to help SMEs with their ambitions to become more sustainable."

Arend Bouwer, Managing Director of Farm Dairy, is one of the enthusiastic clients that have already taken out a Transition Loan. "The dairy market is undergoing a great change, and sustainability has become the standard. This product of ABN AMRO's has given us a push in the right direction. That's a wonderful move by the bank, I think. We sat down with ABN AMRO to determine a sustainability goal that aligns entirely with our strategy. The targets are challenging, but feasible, and I'm very confident about the future."

More and more companies want not only to achieve commercial success: they also want to make a positive impact on the world around them. ABN AMRO is offering the Transition Loan to help support that positive impact. ABN AMRO's SME clients also have access to other forms of financing such as the Green Loan and 'ordinary' medium-term loans.

Eunice Koekkoek

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