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The transaction consists in a synthetic securitisation with Banco Santander Totta, a subsidiary of the Group, backed by green loans to private individuals, homeowners associations, small and medium sized enterprises (SMEs) and mid-caps in Portugal. The operation builds upon the well-established experience in standard operations with the Group across the EU under the Partial first loss Portfolio Guarantee (PPG).
The aim is to enhance access to finance to the final beneficiaries investing in climate action projects, namely energy efficiency of new and existing buildings.
The operation will target investments in climate-action initiatives, more specifically energy efficiency investments in buildings by individuals (new construction and renovation) and potentially other energy-efficiency investments by SMEs and Mid-caps - all to be carried out in Portugal. Some of the projects are expected to be located in less developed and cohesion regions of the country.
Financial intermediaries such as Banco Santander SA ("Santander" or the "Group") play a central role in the energy transition, as financing is a key element to unlock the investments required to implement it. Tackling climate change is indeed a key objective of Santander as it has publicly unveiled its commitment to mobilise green finance lending for EUR 120bn between 2019 and 2025; to achieve this target, Santander is supporting its customers by developing tailor-made financial products and services to promote the green transition.
The operation will allow Banco Santander Totta SA ("BST") to increase its financing with high climate-action content to the real economy. On project quality, the projects are supported by adequate capabilities / governance of the promoter. The expected economic rate of return and the broader social benefit are rated as "good". The capacity of the promoter is considered appropriate for the proposed project.
As typically done with securitisations, the financial intermediary will reduce their own risk and, more importantly, create headroom in its balance sheet to provide more lending. EIB is an experienced player in this area and can facilitate a competitive offer in this space. Additionally, the long-term tenors and favourable financing conditions offered by the EIB are critical for the implementation of the investment projects with a high climate-action component, as they typically require longer investment periods and have higher periods of return on investment.
The operation falls within the scope of the EIB's Environmental and Social Standards - "Standard 11 Intermediated Finance". Banco Santander Totta has adequate capacity, systems and processes in place for identifying, assessing, managing and monitoring environmental, climate and social (ECS) risks related to the potential sub-projects benefitting from EIB support. The final beneficiaries will be required to comply with applicable national and EU legislation in respect of environmental and social matters, as appropriate.
Final beneficiaries will be requested to comply with applicable national and EU legislation, as appropriate.