SEB’s first mandate for coordinating a sustainability-linked loan in the Baltics

Tallinna Vesi has enhanced its syndicated loan agreement with sustainability criterias, supporting the company’s strategic objectives. SEB Estonia acted as the Sustainability Coordinator, marking SEB’s first mandate for coordinating a sustainability-linked loan in the Baltics.

The Tallinna Vesi syndicated loan agreement now includes sustainability criterias with annual targets addressing the company's most significant environmental, social, and governance (ESG) issues. Following the amendment, approximately 82% of Tallinna Vesi's total debt consists of green and sustainability-linked instruments, underscoring the robustness of the company's sustainability strategy and providing a solid foundation for future projects.

"The climate situation and its impact on the water system highlight the need for additional measures in the water sector," said Taavi Gröön, CFO of Tallinna Vesi. "The sustainability-linked addition to the 2023 agreement supports Tallinna Vesi’s strategy of being part of the natural water cycle—offering customers clean drinking water with the confidence that the water will return to nature in the purest possible form," Gröön explained.
The syndicated loan, signed with SEB Pank AS, Swedbank AS, and OP Corporate Bank plc's Estonian branch in May 2023, supports Tallinna Vesi’s investments in the water distribution network and treatment plants, as well as wastewater collection and treatment facilities. These investments are crucial for reducing the environmental impact of water consumption, ensuring the continuity of essential services, and promoting sustainable urban development.

"The sustainability-linked financing provided to Tallinna Vesi is aimed at increasing energy efficiency, including minimizing water losses, and highlights the innovative nature of SEB’s financial products in combating climate change," said Anders Larsson, Baltic Head of Sustainability at SEB. "SEB is proud to advise and support our long-term client, helping to strengthen the water distribution network, wastewater collection, and treatment facilities serving over half a million people, thereby increasing the sector's resilience to climate change," Larsson added.

The loan’s interest margin depends on Tallinna Vesi meeting specific sustainability goals related to renewable electricity production, reducing electricity consumption, and minimizing water losses. "Sustainability-linked loans create greater incentives by tying loan conditions to the company's sustainability performance. Typically, 2-3 ambitious sustainability goals are agreed upon and monitored annually. Achieving these goals results in a lower interest rate, while failure to meet them results in a higher rate," Larsson explained.

Tallinna Vesi is the largest water company in Estonia, impacting the daily lives of almost one-third of the Estonian population. The company offers a service that meets all standards while considering its impact on the environment and nature. The clean tap water produced meets all drinking water standards, and the quality of treated wastewater exceeds current standards. Tallinna Vesi uses renewable energy in its production processes and has set ambitious goals to reduce energy consumption and produce renewable energy by 2030. The company produces green heat and power from biogas generated during the wastewater treatment process and treats nearly 40% of all domestic wastewater in Estonia, prioritizing the health of the Baltic Sea.

In early 2024, SEB was ranked the best sustainability advisor for large companies and financial institutions in the Nordics for the fourth consecutive year. With the mandate as Tallinna Vesi’s sustainability coordinator, SEB expands its advisory services related to sustainability-linked loans to the Baltics.