Finastra has unveiled its ESG Service, a cloud-based SaaS solution that simplifies sustainability-linked lending.

ESG Service is an open and scalable solution that allows for the seamless integration of sustainability performance target criteria into ESG pricing for Finastra Loan IQ and other back-office systems.

Sustainability-linked loans feature intricate pricing structures with multiple moving parts that must be monitored against the sustainability targets specified in the credit agreement. This can consume resources, constrain banks' ESG product offerings, and introduce risks associated with manual processes.

Automating the management of KPIs and ESG pricing changes for sustainability-linked loans enables banks to grow these lending portfolios efficiently and at scale while minimising the risks of manual processes.

Sustainability-linked loans have seen a significant rise in transaction volumes, reflecting the growing interest in ESG-focused financing. Despite a challenging macroeconomic environment and reduced capital market activity, sustainable loan volumes remained steady in 2022, following a record $1.6 trillion ESG financing in 2021.

“A shift in the mindset of corporate stakeholders, investors, customers, and employees is pushing banks to adopt a more sustainable business model, and this is driving demand for sustainability-linked loans,” explained Simon Thorogood, Senior Director, Corporate and Syndicated Lending, Finastra. “This creates a huge opportunity for banks to grow revenues and become leaders in the space, with borrowers looking for banks to help shepherd them through their ESG journey. Finastra’s ESG Service offers banks a well-defined, transparent, and automated solution for managing ESG performance and the associated pricing adjustments, creating a more seamless experience for clients.”

“Furthermore, with complex and constantly-evolving ESG regulations on the horizon, having a centralised store of data will greatly aid banks in being able to efficiently and accurately meet their regulatory obligations in terms of meeting the relevant disclosure requirements.”

ESG Service is a cloud-native SaaS solution that enables flexible sustainability-linked loan pricing with open APIs. It automates the tracking of ESG performance and associated margin changes, benefiting middle- and back-office users like borrowers, sustainability coordinators, and credit managers. ESG Service can support varied deal structures and add pricing components beyond interest and fees. It can also support multiple transaction processing systems. Learn more about Finastra's ESG Service at their website.

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Source: Finastra