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Rabobank Launches First ESG leader - Green - Money Market Commercial Paper and Certificate of Deposit Programme

In evolution theory there are leaders and there are those that follow and those that hobble behind. Rabobank is demonstrating to be a real leader in the world of eco-friendly, sustainable green financing. The Dutch bank with a global reach and expertise in environment financing solutions is credited with launching the first ESG Money Market Commercial Paper Programme. 


What is an ESG Leader Money Market Commercial Paper Programme?
Rabobank teamed up with another leader in green financing, Sustainalytics. Sustainalytics is a global independent provider of environmental, social and governance (ESG) corporate research, ratings and rankings. Rabobank chose Sustainalytics because they are a well-known by market participaints; investors and issuers.


What are ESG Scores?ESG stands for Environmental, Social and Governance. It refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. However rather than to just have Rabobank rated by Sustainalytics for ESG credentials, the bank went one step extra and thought how can we create a market that services the burgeoning demand from short term investors for ESG products.


Robert Ruisch, who runs the Commercial Paper business within the Markets division at Rabo, and colleagues, in particular Olaf Brugman, Head of Sustainable Markets, came up with the idea to create the ESG Leader Commercial Paper Programme.


What is an ESG Leader Commercial Paper Programme?ESG Leader Commercial Paper programme is a totally new programme that contains specific qualities that ensures investors can tick the ESG box when investing in paper issued under the programme, for as long as, and this is the condition, Rabobank remains an ESG Leader as specified and determined by Sustainalytics. The ESG Leader Commercial Paper Programme therefore can be seen as a type of ESG Money Market Commercial Paper. In the green bond market, there are many different ways for a bond to classify as a green or sustainable investment. Time will tell if we are going to see different types of green CP, CD and Bills in Money Markets, or if the ESG format becomes the dominant one. 


What does a Leader ESG Commercial Paper / Certificate of Deposit programme solve?Green bond investors have the problem that there are not sufficient, nor well diversified alternatives for parking cash that needs to stay green. Some banks offer green deposits, where the cash is used to finance wind and solar park cash flows. And whilst that is a good solution especially if the bank providing the deposits of high credit quality, a deposit of course not the same as a diversified investment into a Money Market Fund. Demand from investors for Rabo’s ESG Leader Commercial Paper product, in particular in Asia, is said to be very high. On Thursday Rabo already printed EUR1.2bn under the new progamme for settlement today. 


Why are ESG Leader Commercial Paper / Certificate of Deposit Programmes exiting?Most Green bonds are “Use of Proceeds” (UoP) bonds. UoP does not really work in Money markets because of the very short term nature of the instruments. The ESG Leader Commercial Paper and or Certificate of Deposit Programmes are existing because it is the first time we see a programme receiving a ESG bond rating, It is therefore a first step forwards a world where bond issuers not only have credit scores Or ratings, but also ESG ratings or labels.


Philips’ Sustainable Revolver was a game changer.A deal that can be seen as a game changer, in this context, was Philips EUR1bn revolving credit facility in 2017 that linked the interest rate or coupon to the global lighting firm’s sustainability performance. For the Revolver in which a consortium of 16 banks participated, including Goldman Sachs, HSBC and Morgan Stanley and Rabobank; Sustainalytics equally provided the sustainability assessment.


The deal was unique in that the firm’s ESG rating is linked to potential loan margin adjustments. In this case, Philips’ benchmarked sustainability performance score determines the Revolvers continuing interest rate going up or down. The Philips deal was the first in the syndicated loan market where the pricing is linked to a Sustainalytics ESG rating.


The Philips loan is different to typical UoP green finance, as it links interest payments directly to Philips’ Sustainability credentials. The better these are, the less they pay on their Revolving Credit Facility. And also unlike standard green bonds, which limit the proceeds to sustainability purposes, Philips is able to use the loan for general corporate deployment, giving them maximum flexibility. This benefit equally exists with the ESG Leader CP and CD Programme.


What does it mean to be classified as ESG Leader?As per Sustainalytics' methodology, a company's performance classification is relative to its global industry peers, based on its absolute ESG score. The industry specific performance bands are based on the ESG scores of approximately 4,000 companies that are assessed under Sustainalytics comprehensive ESG Ratings framework.


Who tracks Green Commercial Paper and Certificate of Deposit issuance?CMDportal records all green bonds and produces flow and research statistics for the green bond markets. It has already adjusted it systems, to be able to do the same for money markets. Dealers that claim their Green CP trades and issuers that credit dealers with the same will see their names rise on the Green Money Market Commercial Paper and Certificate of Deposit league tables. For more information, please contact 


You can read the full press release here.


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