ESG banks grant Gunvor giant $912m loan despite past ties to Putin

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by John Konrad (gCaptain) Gunvor, the energy trading company and shipowner co-founded by sanctioned Russian oligarch and longtime friend of Putin, Gennady Timchenko, secured sustainable loans worth $912 million.

The credit facility, which was initially launched at US$500 million in April 2022, gained strong support from 23 banks and was oversubscribed by more than 82%. Gunvor could increase lending with a $200 million accordion feature to accommodate banks that want to provide loan capital after June 2022.

This is the first time that Gunvor has borrowed through a sustainability-linked lending structure that tracks key environmental, social and governance (ESG) performance indicators that include climate, energy transition and human rights.

Also Read: Gunvor Seeks Waiver of Jones Act to Deliver Gasoline to US East Coast

“We are grateful for the tremendous support from our banking partners during this extremely difficult time of record volatility and uncertainty,” said Gunvor Regional Chief Financial Officer Jean Rohr. “Our partners have found confidence in our strong financial results, strong cash management and commitment to the energy transition.”

The question remains, however, as to how much of Gunvor’s past history has been investigated by these ESG banks and how energy traders are handling heightened geopolitical risks in the future.

Gunvor’s Mixed ESG Story

While Gunvor claims he is no longer tied to Russia – Timchenko sold his stake in Gunvor to his Swedish co-founder, Torbjörn Törnqvist in 2014, the day before Timchenko was added to the US sanctions list in following the annexation of Crimea by Russia. — he didn’t cut all ties with all the post-split controversies.

In 2017, a Swedish radio documentary showed that Gunvor had been involved in a Belarusian oil smuggling scheme characterized by corruption at the highest levels of the Belarusian government. In 2019, Gunvor was fined by Swiss authorities for failing to put in place adequate measures to prevent bribery of foreign officials.

In March 2020 – in an article titled The inside story of how Putin and his KGB cronies took over Russia – The Sunday Times published an article based on a 2015 interview with Sergei Pugachev, once known as the Kremlin banker, linking Gunvor to Russian President Vladimir Putin.

Gunvor is also a central character in last year’s bestseller The World For Sale by Bloomberg journalists Javier Blas and jack farchy which documents the history of ESG-related transgressions by energy traders.

ESG lending gets backing from big banks

“ESG-based finance is the hottest new topic in shipping right now,” said a shipping bank official who declined to be named. “Discounted financing is provided for environmental savings, but banks have been slow to index factors such as increased ton-miles and increased transport of dirty coal due to the war in Ukraine or geopolitical tensions caused by China.”

The Chinese bank CITIC Bank International was, in fact, one of the main lenders in this ESG agreement along with DBS, Natixis, Rabobank, Crédit Agricole, Sumitomo Mitsui and Société Générale. Gunvor says the loan will support its “global growth strategy” of geographic expansion, product diversification and investments across the value chain.

Elon says ESG is a scam

Gunvor’s recent ESG-backed loan raises the question of what ESG really means and whether banks will ever take into account rapidly growing geopolitical factors – including the risk of war, the transport of Russian goods, transporting coal, treating Ukrainian sailors, and what shipping companies are doing to help redistribute food and fertilizer as the world faces potential starvation – in ESG calculations.

“If ESG lending helps a shipowner reduce emissions by 2%, banks consider that a major success,” the bank manager said. “But what if that shipowner burns more fuel by sailing faster due to high freight rates or refuses a food relief contract to ship dirty coal instead? These ESG loans will be they then retracted? I think that is unlikely.

Gunvor’s nearly $1 billion loan comes shortly after Elon Musk, who owns multiple ships through his rocket company SpaceX, called ESG a “scam” on Twitter last month after S&P Global, the manager of a popular ESG index, announced that it had kicked Musk. Electric car company Tesla dropped out of the index while giving high marks to Exxon Mobil, one of the world’s largest producers of fossil fuels.

“While Tesla didn’t make the list!” He added: “ESG is a scam. It has been weaponized by fake social justice warriors.

Elon is not alone. While shipping – as seen at the recent Marine Money Week conference – is very bullish on ESG (at least on the decarbonization side, there is still a long way to go on topics like minority stake at the executive level), environmental-social-governance lending has faced a growing backlash from some political and financial leaders since the Russian invasion. Earlier last month, former Vice President Mike Pence said he wanted to curb ESG, saying it favored left-wing goals over the interests of companies and their employees. BlackRock, an avowed leader in sustainable investing, said it would back fewer shareholder proposals on climate issues because many are too “prescriptive”. And, private equity executive Steve Schwarzman, among others, has blamed ESG as a contributing factor to the oil price spike.

“I’m very positive about the performance of the shipments. I am very worried about the world,” said BW Chairman Andreas Sohmen-Pao, an early investor in shipping-related sustainability ventures, at this month’s Marine Money Week conference. . “Over the past few decades, we have built this incredible economic machine. It was built on the back of cheap energy, cheap money and cheap labor. And now the system is going through a period of incredible stress.

Could Gunvor also make big investments

While Gunvor has not said publicly how the ESG loan will be spent, he did later announce an investment in a large ESG-related green energy project in Rotterdam. Gunvor said it has signed a joint development agreement to build a green hydrogen import terminal in the Port of Rotterdam by 2026, they announced on Tuesday.

The companies’ plan is to receive ammonia generated from renewable sources outside the Netherlands and convert it to hydrogen on site before distributing it in the Netherlands, Germany and Belgium, they said. stated in a press release.

Also Read: How Much Do Employees of Energy Trader Gunvor Earn?

Only time will tell if ESG lending will push companies like Gunvor to be stronger citizens of the shipping industry and help push companies to invest in big projects like green hydrogen or if, as suggested Elon Musk, ESG lending will incentivize the wrong types of companies and corporate behavior.

Also Read: Gunvor Seeks Waiver of Jones Act to Deliver Gasoline to US East Coast

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