We talked to Banco Santander, one of the largest banks in the world by market capitalization and in 2022 recognized as the world’s leading export finance bank in terms of deal volume.
Its corporate banking global division, Santander Corporate & Investment Banking (Santander CIB), has strong relations with export credit agencies including Atradius DSB. We asked Guillermo Hombravella, Global Head of Export & Agency Finance and Claudia Gómez Arseneault, Global Head of ESG for GTB how the bank embraces sustainability.
1. How is Santander embedding sustainability on a strategic level?
Guillermo: we are a large international financial services company employing more than 200,000 people. The connection with people and society is huge and brings certain responsibilities. I believe that large corporations like ourselves only succeed when they have a clear purpose. And fortunately, we have that: Santander’s purpose is to help people and businesses prosper, while focusing on promoting inclusive and sustainable growth and aiding the transition to a low-carbon economy. Santander has the ambition to achieve net zero carbon emissions across the group by 2050, supporting the goals of the Paris Agreement. This objective applies to group-wide own operations (which have been net-zero since 2020) and to customers’ emissions stemming from Santander’s lending, advisory or investment services.
Claudia: Santander is also a founding member of the Net Zero Banking Alliance, a UN-convened group of leading global banks committed to financing ambitious climate actions to reach net-zero emissions by 2050. Commitments are to align portfolios with pathways to net zero by 2050 (1.5°C pathway) and, within 18 months of joining, set 2030 targets (or sooner) and a 2050 target, with intermediary targets to be set every 5 years from 2030 onwards. The first 2030 targets will focus on priority sectors, with further sector targets to be set within 36 months, and every bank is required to publish annually absolute emissions and emissions intensity in line with best practice and within a year of setting targets, disclose progress against a board-level reviewed transition strategy setting out proposed actions and climate-related sectoral policies. Santander has already set net zero targets for power generation, oil & gas, steel and aviation, and we have set a 2030 coal phase out commitment, available in the Climate Finance Report 2022 – June 2023.
2. Zooming in on the export finance activities: how does this relate?
Guillermo: my team and I are part of Santander CIB, Santander’s global division that supports corporate and institutional clients, including export and trade finance. In this context, we see that sustainability is a key driver for the success of our customers and partners. We see Santander CIB’s contribution as essential to fulfilling the group’s responsible banking commitments. We are aiming to raising over EUR 120 billion in green finance by 2025 and EUR 220 billion by 2030. By September 2023, EUR 105.9 billion had already been raised or facilitated by Santander CIB.
We have a good overview of the market trends in sustainability given our leading position as an Export Finance bank. Overall, we were the global leader in export finance in 2022 with 40 transactions worth over EUR 8 billion, giving Santander CIB an international market share of 12.1% according to Dealogic. Besides Europe, Latin-America and Asia are very important markets for us with offices in the New York, Mexico, Santiago de Chile and Hong Kong, including two dedicated ECA-hubs in New York and Hong Kong. It’s these growth regions where we hope to close some relevant green finance deals.
Claudia: Santander CIB’s offerings enabled the strong growth in Santander’s renewable energy finance for the past 10 years, reaching the second position in renewable energy export finance with a 4.4% market share according to Infralogic. This for example includes the largest planned wind farm in the southern hemisphere, in Australia, with a capacity of 923.4 MW, and our role as export finance advisor for the development of two gigafactories for battery manufacturing in Europe and the US. Furthermore, Santander has established key partnerships in the sector with companies such as Envision and AESC Group to accelerate the net zero transition.
3. When looking at greening specific product lines; how is Santander embracing this?
Claudia: Our ESG approach is reflected in our strategy and culture. We created an ESG structure with dedicated teams advising on sustainability related matters across all products globally, covering all product classes, sectors, and geographies. Within Santander CIB this means a specific Global Head of Sustainable Tech and Energy Transition (Lucas Arangüena, who is also Group Head of Green Finance) and dedicated ESG teams for each solution. I am the Head of ESG for Global Transaction Banking (GTB) specifically, supporting across the board: cash management, export finance, international financial institutions, supply chain finance, and trade & working capital solutions. The role of ESG at GTB is assisting clients in their transition to more sustainable business models, offering both strategic solutions and financial and product structures designed specifically for different geographies, industries, and market segments.
Guillermo: next to the sustainable financing structuring there is a big toolbox that enables us and our clients to make decisions that can contribute to their net zero commitments, on a financial or even more strategic level. One important tool is our group-wide Sustainable Finance Classification System (SFCS), an internal framework that outlines harmonized criteria to consider a financial product sustainable, green, social, or sustainability-related. It draws upon international industry and official guidelines and principles, such as the ICMA Green and Social Bonds Principles, the Climate Bond Standard, and the EU Taxonomy. We also support clients through our Sustainable Tech team which provides strategic and corporate finance advice on opportunities to accelerate adoption of low-carbon technologies. It focusses primarily on the following core areas: hydrogen; battery technology; energy storage and EV charging; carbon capture and climate technology; clean fuels waste and circular economy.
4. What trends in green finance can you identify in working with ECAs worldwide?
Guillermo: Santander has a history of working closely with ECAs. Together with ECA’s, development banks and other institutions we have accumulated expertise on sustainability needs. This resulted in successful adoption of the EU Taxonomy and a high degree of ESG specialization per product and geography. Within our bank but also at other organizations. For example, we have been following closely the development of Atradius DSB Green Label policy, as we keep specializing as a green finance lender.
The project that enhanced Santander and Atradius DSB’s cooperation was the Green Shipping Fund (GSF). We launched this after two years of collaborative work with PROW Capital and Atradius DSB in March 2022. GSF is a EUR 420 million untied debt fund that provides credit to shipowners for investments in new and existing vessels or retrofits that demonstrate measurable and significant GHG emissions reductions. It’s a true pan-European instrument also meant for European SMEs, for which access to green finance is often more complex. As of today, a total amount of EUR 114.8 million has already been implemented, and several other transactions have been presented to and approved by the GSF credit committee and are being processed between Fund Manager (PROW) and the underlying sub-borrowers.
Claudia: I am glad to see the gradual roll-out of new green products and untied policies, allowing corporates to embrace new structures that deliver other value-added features in addition to pure debt instruments. It also means that there is a growing amount of national decarbonization strategies, benefitting the green economy. We welcomed some of the leading ECAs such as Spain, France, Italy and Netherlands. Some have developed their own green framework of classification of activities influenced by the EU Taxonomy whereas others have explicitly aligned themselves with it. All of these developments have also resulted in green deals with our involvement. Just to name a few: a EUR 150 million green loan for renewable energy projects including battery storage in Latin-America and EUR 1 billion green ECA-covered loan for onshore and offshore wind farm project across Europe.