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Berkshire Hills Bancorp and PNC make headway in sustainable finance


Berkshire Hills Bancorp and PNC FIG Advisory assist clients with sustainability financing practices.

Berkshire Hills Bancorp and PNC make headway in sustainable finance
When exceptional and unique business requirements meet specialized capabilities, magic can happen.

Recently Berkshire Hills Bancorp announced the completion of its public offering and the sale of its first sustainability bond – a $100 million bond offering to help finance environmentally or socially conscious projects. The offering saw PNC FIG Advisory, part of PNC Capital Markets LLC, act as co-underwriter and coordinator for it. The company was also the sole environmental, social and governance (ESG) structured agent on the transaction, engaging PNC's sustainable finance practices and Berkshire's leading ESG experts to help establish the bond's sustainability goals to other consulting services.,

What exactly are stability bond? They are similar to traditional bonds that a financial institution or investor "buys" from borrowers known as issuers or sellers. Investors are technically "buying" bonds, but in reality they are just another form of borrowing. The seller of the bond must repay the loan by a set period, including periodic interest payments.

The primary purpose of any bond is to help the borrower (usually a business or government entity) finance a specific project and/or initiative. Funds provided to borrowers are referred to as "bond proceeds" and these funds are used to implement specific projects and/or initiatives.

What differentiates sustainability bonds from regular ones is that the proceeds are used to finance environmentally or socially conscious projects or activities, including: 
  • Third-party certified "green" building construction
  • Renewable energy production
  • Affordable housing
  • Diversity and inclusion projects

The project aims to achieve predetermined objectives based on the financing terms of the bond and the objectives of the borrower.

“As ESG activity becomes increasingly critical across the business landscape, PNC is committed to improving its ability to help clients better live their values and priorities,” said Matt Resch, managing director for PNC FIG Advisory.

Unique opportunity
Incidentally, Berkshire was the first US public bank holding company with assets under $150 billion to issue sustainability bonds and the 11th US financial institution to issue ESG-focused bonds, thus effectively placing it in league with institutions which are 20 times its size, such as PNC Financial Services Group, Inc, which issued its first sustainability bond only in 2019.

Berkshire Hills Bancorp is undergoing a transformation as it strives to strengthen the financial potential of its communities. Under a new leadership, it is increasing its focus on its 176-year history of ESG and customer experience so that it can fulfill the bank's vision of being a leading socially responsible community bank. 

"When I joined Berkshire Hills Bancorp about a year ago, it was a new relationship for PNC and we knew we had debts that we needed to refinance in the near future," said Andrew Underwood, President of PNC FIG Advisory. “We consulted with them about perpetual bonds because we knew they would serve their strategic business goals.”

“We view our sustainable financing activities as a catalyst to deliver on our BEST Community Comeback and be an engine for positive change in our communities. As a result of this Sustainability Bond issuance, we’ll support the clean-energy transition, help individuals achieve the dream of homeownership, expand services from small businesses and nonprofit organizations within low-to-moderate income neighborhoods and improve equity in our communities,” said Gary Levante, Berkshire’s head of ESG.

In 2020, PNC launched its Sustainable Finance Practice to better support clients with their own ESG-focused initiatives and goals.

“Sustainable Finance Practices helps clients think through their ESG strategies, goals and approaches, and structures financing that takes client goals into consideration by offering support for environmental and social debt issuances and sustainability-linked loans.

 said Kristi Eberhardt while adding, “There are a few ways we can tailor financial solutions for clients with sustainability in mind – either making specific sustainability-focused purchases or investments or linking financial product pricing with sustainability performance”. 

“This work is only possible when we have deep engagement with our clients, knowledge of their goals, and strong expertise in ESG, both where it fits into the world now, and what we think it will look like in the future.”

The impact and benefits of sustainable finance are wide and far-reaching since this space acts as a vehicle of influence which touches a multitude of business metrics including stakeholder engagement, investor base, corporate social responsibility strategies, and potentially a lower cost of capital, among others.

Furthermore, social responsibility is a high priority for organizations. 

According to the results of a recent study by PNC’s Institutional Asset Management group, 92% of all executives surveyed opined that social responsibility is a priority for their organization. 

With PNC’s experience in that space, its leadership feels the bank is uniquely positioned to help its customers forge their own path around sustainable financing.

“PNC is leading the way with community banks and ESG,” said Underwood. “There have been two community bank sustainable-linked bond deals ever, and we've done both. But we know it's not just about the transaction, it's about a long-term relationship.”