What's going on?
Finnish telecoms company Nokia announced it’d dialed up almost $2 billion of new funding on Wednesday. Unusually, however, the cost of the debt will be contingent on progress towards its environmental targets…
What does this mean?
Nokia’s new “revolving credit facility” is similar to the arranged overdraft you might have with your bank. The line of credit comes with a fee – but for Nokia, the precise cost will be determined by whether or not the company hits its sustainability targets. If, by 2030, Nokia’s successfully reduced its own greenhouse gas emissions by 41% and the gases emitted by its products by 75% compared to 2014 levels, it’ll pay banks less than the base interest agreed. Failure to do so will mean it pays more.
The agreement is emblematic of the recent growth of “green finance”, which includes “green bonds” whose funds are specifically earmarked for use on environmentally friendly projects.
Why should I care?
For you personally: Cold in judgment, green in blood.
Organizations linking their financial futures to positive environmental progress – as opposed to simply paying lip service to the climate crisis – may be taking a step in the right direction towards some of the $2 trillion worth of green corporate opportunities identified earlier this month. And Nokia may now become more attractive to the growing number of investors focused on backing environmentally friendly stocks – including hedge funds hoping to attract your money. US regulators are currently considering whether to allow “retail investors” earning less than $200,000 to invest in that notoriously risky industry.
The bigger picture: Race to the Finnish line.
Several major European nations, including the UK, have now pledged to become “carbon neutral” by 2050 ahead of a climate summit next week. But Nokia’s home country expects to be well ahead of the curve, promising it’ll be carbon neutral by 2035 (only Norway, with a target of 2030, is more ambitious). With Finland’s largest company now putting its money where its green is, success appears likely.