With thoughtful loans, KBC Commercial Banking encourages companies to make more sustainable investments.

KBC advises companies on many aspects of their sustainability strategy. But perhaps the most direct approach involves ‘Sustainability Linked Loans’ (SLLs): loans that give customers a push in the right direction by linking them to clearly defined - and credible - KPIs from their sustainability strategy. AGC Glass Europe, for example, used these loans to help fund its role as an innovator of recycled glass for buildings.

For Wim Eraly, Senior General Manager at KBC Commercial Banking, the benefits of the Sustainable Financing Solutions offering at KBC are obvious. 'First of all it increases the credibility of your company’s sustainability strategy and the perceived sustainability of your brand,' he explains. 'The KPIs we link to these financing products are not optional. To start with, we will recommend using only those KPIs that actually have an impact. This requires expertise, and that’s something we have in-house.'

Moreover, these financing solutions help companies prepare for the obligations imposed by the impending European Corporate Sustainability Reporting Directive (CSRD). This requires all companies, starting incrementally from this year, to report on their sustainability strategy and to have it audited, just like their financial reporting.

With a Sustainability Linked Loan, you increase the credibility of your company’s sustainability strategy and the perceived sustainability of your brand.

Wim Eraly - senior general manager at KBC Commercial Banking

Walk the walk

For KBC, the strategy has been clear for some time. Companies that have their sustainability strategy in place and put it to work are the strong companies of tomorrow and will find a partner in KBC. 'We believe in sustainable entrepreneurship,' says Eraly. 'So we like to see companies finance their transition to more sustainable operations with SLLs. It shows that they are genuinely willing to take action: walk the walk rather than greenwashing.'

Eraly acknowledges that there is pressure from above. 'The Green Deal is here to stay. There is a lot of criticism of companies, whereas people greatly underestimate just how much effort those same companies are already making to achieve the Green Deal goals.' The same applies to banks. 'Some 70 per cent of business finance in Europe is provided by banks. European regulators see this as a lever to oblige companies to meet climate and sustainability targets. However, we want to avoid being forced to act as watchdogs at a later date, as is already the case in the fight against money laundering. Working proactively with solutions like SLLs makes us feel more like partners in the transition.

Largest emitter of greenhouse gases

KBC and AGC Glass Europe found themselves in close alignment on that ambition, adds Davide Cappellino, President of AGC Architectural Glass Europe & Americas Company. It is a subsidiary of Japan's AGC, a global giant with more than 200 branches in 30 countries. AGC is particularly strong in the production of flat glass for the automotive market (in which it is the world market leader), for buildings and for more specialised sectors such as transportation and solar panels.

'We have made a strong commitment to sustainability,' Cappellino says. That commitment manifests itself in many areas. For example, the headquarters has a BREEAM certification rating of ‘Excellent’. In addition, AGC is investing in solar panels and wind turbines at all its production sites. But Cappellino leaves no doubt: it is not so much within its own operations as in the broad market where AGC can make a difference in terms of sustainability. 'Our main business in Europe is producing flat glass for buildings. That puts us in a good position to make a big contribution, including to the achievement of the Green Deal goals. Europe’s building stock is the continent's largest emitter of greenhouse gases. And glass is the most cost-effective way to improve building performance around emissions.'

Recycling bottle glass is easy, because the duty cycle is short. For glass used in buildings, it amounts to an end-of-life challenge and it’s a very different story.

Davide Cappellino - President at AGC Architectural Glass Europe & Americas Company

Partners with long-term vision

To achieve this in a sustainable way, three challenges have to be overcome. The first is technological. 'We want to be at the forefront of sustainable glass production methods,' says Cappellino. 'A good example is the VOLTA project, in which we are working with the manufacturer Saint-Gobain to develop a new type of glass furnace that runs half the time on electricity. The result? A drastic reduction in CO2 emissions.'

The second challenge is commercial: preparing the market for the use of new, more efficient types of glass. 'We have developed a new type of window for buildings, FINEO, in which we create a vacuum in the space between the glass panels; that is a big step forward in terms of energy efficiency. 'To get that installed in new buildings, we have to work with our customers in a smart way,' says Cappellino.

Finally, the third challenge is financing. 'The transition that the European building stock has to go through will take decades. So we need partners who want to join us in realising that long-term vision,' says Cappellino. 'We’ve found that partner in KBC. The SLL we entered into with KBC is the first step in that partnership. We made very pragmatic choices for the KPIs, and we are very happy with how that turned out.'

End of life

'The KPIs are built around the use of recycled glass, a still largely unexplored area in glass for buildings. Glass can be recycled perfectly well,' says Cappellino. 'That’s already very common practice for bottle glass. It’s also easy because the duty cycle of a glass bottle is short. It’s a completely different story for buildings: a glass window in a building can easily last for 50 years. Moreover, it is often attached to all kinds of other building materials, so it’s not easy to recover and recycle.'

'It amounts to an end-of-life challenge,' Cappellino continues. 'In other words, as a glass producer, how do you get hold of enough high-quality glass to reuse? You hardly notice a slight discolouration in a wine bottle, but the slightest defect in a large window is a very different story.' Yet Cappellino is determined to continue down this path. 'We are also developing a solution for our customers for when the glass in their buildings is due for replacement. Recycling glass is also much more energy-efficient than making completely new glass. With the inevitable renovation wave set to roll across the entire European building stock, that is the only right path.'

So KBC has now joined the journey. But Eraly stresses that AGC Glass Europe is not the only partner on this journey. 'It’s clear that the use of SLLs is on the rise. At KBC, we are seeing more and more companies opting for this financing solution.'

What steps is KBC itself taking to be more sustainable?

Read all about it in our sustainability report.

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