Natixis developed a new Green Weighting Factor methodology which will be applied to analytical RWA on the company’s financing deals in a move to address potential changes in regulation.
The Green Weighting Factor provides for a positive adjustment on analytical RWA for deals that create affirmative climate and environmental action, while involving a negative adjustment on deals with an adverse environmental impact. This innovative mechanism helps Natixis further comply with Paris Agreement targets in its financing operations.
The Green Weighting Factor is an in-house capital allocation mechanism that aims to promote finance deals with a positive impact on both the climate and the environment, by adjusting the expected profitability threshold on these various transactions according to their effects on climate change.
Four pilot sectors have already been selected to test the Green Weighting Factor system – automotive, real estate, electricity and mining. Natixis has defined criteria to classify every individual financing deal across each of these four sectors depending on its environmental and climatic impact, designing a fully operational system that can now be tested on 31 per cent of the portfolio of financing deals in question at the company. This open scalable methodology will gradually include the European Union’s taxonomy, or classification system for environmentally sustainable economic activity, as it is developed over time by the European Technical expert group on sustainable finance.
The Green Weighting Factor system will be rolled out by the end of 2018 and will gradually apply to new asset or project finance deals, as well as corporate loans by Natixis across its various business sectors worldwide.
“Our Green Weighting Factor mechanism will help us support our clients even more effectively as they seek to achieve their sustainable growth goals. It is a natural step to build on the European Commission’s work on the green supporting factor and aims to measure the gradual shift in our balance sheet to support the fight against climate change,” says François Riahi, CEO of Natixis.
