Financial tools to support net zero transition
SustainabilityLast year, BMO updated its sustainable bond framework to include potential support for various enterprises transitioning to a net-zero economy, including maritime transportation companies using cleaner energy sources and the developers/producers of low-carbon marine fuels.
The financial institution is familiar with the Green Marine certification program as a Green Marine partner.
Cover image: Micheile Henderson, Unsplash
John Uhren, BMO’s managing director for Sustainable Finance, applauds Green Marine participants for being part of a certification process that clearly identifies 14 environmental performance indicators prioritized by the maritime industry and a framework for measuring improvement.
Not every sector has the benefit of the clarity that the Green Marine organization gives its membership. By looking at the Green Marine performance of a participant, we immediately have a grasp of the priority environmental issues and where each participant is in terms of achieving progress.
BMO’s keen interest extends to Green Marine’s participants and partners. “If your company is planning something innovative around one of the program’s environmental performance indicators to, let’s say, reduce NOx and SOx emissions, or improve aquatic ecosystems or ship recycling, we’d really like to see how we might be able to become involved,” Uhren says. “In addition to possible financial support, we might be able to put you in touch with the right experts to commercialize or upscale your project, create an additional revenue stream with carbon credits, or position your overall story so that your products or services are noticed by the intended customers.”
The updated bond framework enables the financial institution to support the development, manufacture and distribution of low-carbon fuels and waste-to-energy pathways that reduce the carbon intensity of fuels. The supported low-carbon marine fuels can include renewable electricity, hydrogen, e-methanal, e-gas oil and batteries, biodiesel and bio-methane, or LNG in alignment with the International Maritime Organization (IMO) goals and the Poseidon Principles trajectory for marine insurance.
As one of the largest developers of compliance-grade carbon credits in Canada, BMO has the capability to help clients monetize credits under North American clean fuel programs, including Canada's Clean Fuel Regulations, and British Columbia's Low Carbon Fuel Standard. BMO can help with assessing program eligibility, compliance reporting, and developing credits to generate a new revenue stream for a business.
“Having a strong, reputable advisor is important to look at a company’s initiatives – whether it’s investing in cleaner running equipment or carbon sequestration – to make sure it would constitute a well-structured credit,” says Uhren.
Green Marine’s connection with BMO originates with Radicle Group Inc., which joined Green Marine as a partner in January 2016. BMO Financial Group completed its acquisition of Radicle in December 2022 to expand the financial institution’s carbon capabilities by helping its clients to understand and assess opportunities for decarbonization and pairing them with pathways for incremental revenue through environmental commodity markets.
BMO Financial Group is offering maritime companies its advisory services that range from how to develop a project so that it generates tradable credits to financially helping them to realize their decarbonization strategies to achieve net-zero goals.
Other services are part of the Energy Transition Group, and BMO Climate Institute that BMO established in 2021 to support their clients in the global economic shift in energy production and consumption.
BMO also launched its Greener Future Financing program in the United States in April 2024 as the first U.S. climate-financing program to help small and medium-sized businesses to build future-ready climate resilient operations. Available in 24 states, the program includes a better interest rate on a climate resiliency loan along with advisory services to business owners to build climate resilience into their operations as they reduce greenhouse gas (GHG) emissions. The advisory service provides climate-related insights on emerging policies and regulations, technologies, and case studies that can help clients realize climate-related opportunities and manage risks.
“We’re focused on being the lead partner for our clients in their transition to a net-zero world,” says Michael Torrance, BMO’s chief sustainability officer.
“We concentrate on how we can have a positive impact on sustainability in the way that we collaborate with our clients, the role we play in the economy as an allocator of capital, and our approach to managing risk with a broad vision of sustainability tied to our purpose of boldly growing the good in business and in life.”
BMO Financial Group announced its Climate Ambition in March 2021. The financial institution committed to deploying $300 billion in sustainable lending and underwriting to companies pursuing sustainable outcomes by 2025. BMO started issuing loans with a link to sustainability in 2019. Along with other lenders if the loan is syndicated, BMO offers qualifying companies financing with an interest rate that varies based on environmental and/or social performance.
“These clients receive a slightly lower interest rate if they achieve pre-determined sustainability objectives by a specific timeline,” Uhren explains. “On a substantive loan, the lower rate can generate significant savings.”
As with all clients, BMO works to understand the business realities that each company faces, but also negotiates a structure that will withstand outside scrutiny.
Any product that we put forward that has a climate or sustainability link will involve meeting significant measurable targets such as the IMO trajectory for the shipping industry’s decarbonization.
In addition to helping clients transition to a net-zero world, BMO used its vast network of resources and inaugural Climate Solutions Conference on April 24th in San Francisco to introduce businesspeople and/or investors who might be of mutual benefit in achieving decarbonization goals from each other’s products and services.
“We also rolled out training for more than 2,000 of our commercial bankers recently so they are more aware of the issues that our clients must consider in terms of climate change impacts, as well as potential opportunities in addressing these challenges, including with innovative products such as sustainability-linked loans,” Torrance says.