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Loans used to be all about financial metrics: sales, profits, debt levels. Now banks and investors want to know more: How does a company deal with the environment, its employees and leadership?
When the Norma Group from Maintal, Hesse, needed new machines, it was clear: they should consume less energy and be less risky to maintain than their predecessors. And: They had to be financed. Annette Stieve, CFO of the Norma Group, knew that sustainability was also playing an increasingly important role in financing. The listed company – more than 8,000 employees worldwide, annual sales of 1.2 billion euros in 2023 – produces, among other things, components for the automotive industry.
“Sustainability is deeply anchored in our corporate strategy,” says Stieve. And that should be worth it, even with financing. So Norma offered a promissory note for 120 million euros. Banks and other lenders could invest in it. This promissory note has a special twist: If the company meets and exceeds set sustainability goals, it has to pay investors less interest. If Norma fails to meet its sustainability goals, the lenders' interest profits increase. The interest among donors was huge.
Sustainability interesting for investors
“It is essential for us as a bank that we also become more sustainable.” That's how Tim Buchholz sees it. He is responsible for sustainable financing at DZ Bank in Frankfurt. Financial institutions must also make it clear in their portfolios that they finance sustainable companies. That's why DZ Bank, together with 20 other lenders, invested in the Norma Group's promissory note with the sustainability twist.
This is modern risk management. After all, which bank wants to finance a company whose strategy is not sustainable? For example, because it uses too many resources? Or because it is too dependent on fossil fuels such as oil and gas, which will cost more and more in the coming years?
As a listed company, Norma Group has been obliged to publish so-called “non-financial data” for years. Data that provides information about the role environmental, social and corporate governance aspects play in the company. These so-called ESG criteria are playing an increasingly important role when evaluating financing.
“This is not eco mumbo jumbo”
Because a cycle has started: the European Union has set standards with its “Green Deal” rules. In economic practice, this means for an industrial company like the Norma Group that it has to invest in sustainability: less CO2 emissions, less energy consumption, more appreciation for employees, more social offers.
Banks are also obliged to do this and they also have to take this into account in their strategies. Hence their increasing interest in “green” financing. However, Kristina Jeromin, an expert in sustainable financing, does not like the term “green” in connection with such financial questions: “This is not just any eco-hocus-pocus, but sustainability information is a relevant part of the future viability of companies.”
There are still tangible problems for many companies
But she also knows that there are still tangible problems. For example: no common language. Many companies do not yet have the relevant data. You first have to laboriously find them or have them created. In addition, companies are currently receiving completely different questionnaires from different banks. This needs to be made much easier, says Jeromin, so that it is clear to companies which data is really necessary for everyone.
Relief would mean: uniform, clear standards for everyone. So far, every bank has its own sustainability criteria. And both sides, banks and companies, complain about additional bureaucracy. But the effort can be well worth it. CFO Stieve took a close look at the Norma Group and its promissory note. The result: Anyone who has the necessary measurable data on environmental, social and corporate governance aspects can benefit from financing with a sustainability component. “Then you can enjoy this bonus from the interest margin, which can be a five-figure amount.”
