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PERSPECTIVES

Putting Our 2025 Sustainable Progress Strategy Into Action

March 11, 2021
Courtney Lowrance, BCMA
Sanaa Mehra, BCMA

 

Limited natural resources and a growing population means we must rethink the ways we extract, design, produce and use materials. In the 2025 Sustainable Progress Strategy we announced last year, we articulated Citi's ambition to play a leading role in driving the transition to a low-carbon economy, and this means supporting our corporate clients as they transition to more sustainable business models.

We must act quickly to address the challenges of climate change, including the need for reduced CO2 emissions, sustainable water and energy consumption, while also ensuring a Just Transition and sustainable growth. This will require new sustainable materials.

Recently, we had the privilege of working closely with our client Arkema, successfully issuing their inaugural €300 million green bond. As one of the worldwide leaders in specialty materials, Arkema is at the forefront of materials innovation, creating sustainable products in multiple fields including for construction, light-weighting solutions, 3D printing, new energies or energy storage. As part of its portfolio sustainability assessment, Arkema assessed 72% of its sales at end-2020, with 50% of its sales significantly contributing to the UN SDGs. In order to reinforce its commitment in term of sustainable offering, Arkema has set an ambitious target of increasing to 65% the proportion of sales significantly contributing to the SDGs by 2030. Moreover, Arkema develops innovative and sustainable solutions through five R&D platforms dedicated to sustainability with particular attention to the circular economy.

In our role as Green Structuring Advisor, we helped them craft a robust framework that emphasizes the growing importance of bio-based materials in the circular economy.

The proceeds of Arkema's green bond will be allocated to the financing of their new plant in Singapore, which will be 100% dedicated to producing a high performance bio-based polymer made from castor oil, a renewable and sustainable feedstock.

This is an important precedent both for the chemicals sector and for those issuers focused on the circular economy. This issuance is noteworthy for three reasons:

First, we worked with Arkema to highlight how their product satisfies several conditions laid out in the EU taxonomy for the Manufacture of Plastics, which guides market participants in defining sustainable investments.

Second, the framework utilizes Lifecycle Analysis (LCA), an increasingly important tool for verifying low-carbon products, particularly those that are bio-based. The LCA profile for Arkema's product is approximately 40% more favorable in terms of CO2 emissions per kg than that of a panel of fossil fuel-based polymers.

Finally, the framework considers sustainability throughout the value chain - from farming of feedstock (castor) to the use of the end product and end-of-life management. Castor is a non-edible crop grown on marginal lands with no deforestation. More than 80% of the world's castor beans originates from India, in and around the State of Gujarat. To encourage sustainable castor bean farming there, Arkema has partnered with other organizations to launch an educational initiative on sustainable farming and sourcing of castor. This initiative exemplifies a transition pathway for sourcing and producing materials that is sustainable, low-carbon and equitable. At the end of 2020, the program counted more than 4,500 certified farmers, with the objective to reach 7,000 certified farmers by the end of the second phase in 2022.

We are proud to have worked on this landmark transaction for Arkema, which highlights the important role that bio-based materials have in the transition to a low-carbon and more circular economy. Replacement of products made from fossil fuels with bio-based materials can contribute significantly to reducing CO2, as increased demand for feedstock does not lead to increased land use emissions or biodiversity loss. Furthermore, Arkema bio-based materials are increasing circularity with the possibility to reuse and recycle. This is where the circular economy meets the bioeconomy.

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