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Natixis becomes first bank to manage the green impact of its balance sheet

Natixis’ Green Weighting Factor, a mechanism that allocates capital to financing deals based on their climate impact, is now up and running.

It applies to Natixis’ financing across all business sectors worldwide, with the exception of the financial sector.

Under the mechanism, analytical risk-weighted assets (RWA) are reduced by up to 50 percent for green deals, while facilities that have a negative environmental and climate impact see their analytical RWA increased by up to 24 percent.

The adjustment of the expected rate of return of each financing deal based on its environmental and climate impact provides a strong incentive for Natixis’ teams to favor green financing when assessing deals with equivalent credit risk.

Through the initiative, they thus actively contribute to achieving the United Nation’s Sustainable Development Goals related to climate change and the environment.

The initiative was initially announced at the Climate Finance Day in Paris on December 11, 2017. After 18 months of development, Natixis has now become the first bank in the world to adopt such a tool to actively manage the climate impact of its balance sheet, going beyond mere reporting.

The aim is to align Natixis’ financing over time with the goals set out in the Paris Agreement on climate change. Targets for this transition will be set out within the coming year.

The Green Weighting Factor was successfully implemented into the bank’s existing credit approval process and systems on September 16.

It is based on a detailed sector-based methodology whereby each financing transaction is assigned an environmental rating on a seven-level color scale ranging from dark brown to dark green. This rating is derived from an assessment of the deal’s climate impact and factors in any significant non-climate-related environmental externalities including water, pollution, waste and biodiversity. The rating applies to either the asset or project being financed, or to the borrower for general purpose financings, whether a corporate or public sector client. Each color corresponds to an adjustment factor that is applied to the risk-weighted assets of each transaction and is used to assess its expected profitability.

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