$500 million green 'club' loan to Olam depends on ESG targets

Signal of change / $500 million green 'club' loan to Olam depends on ESG targets

By Shola Powell / 06 Apr 2018

Olam, a Singapore-based world leading food trader, has secured $500m credit linked to a three-year sustainability club loan which is Asia's first green "club" loan. Under this facility, Olam is required to meet improvement targets for a comprehensive range of environmental, social and governance (ESG) metrics to be assessed by Sustainalytics, an ESG and corporate governance research and ratings firm. If Olam hits more than 50 of the targets the interest rates will be lowered. ING is the sustainability co-ordinator and 15 banks are providing the club loan in equal parts.

So what?

In the past, corporates have shied away from green financing as it was more expensive than bonds or straight loans. However, rates have been decreased to match more traditional lending as banks have become more eager to increase their green financing exposure. Will linking sustainability to credit offer enough incentive for corporations to make serious steps towards a more sustainable business model? Does making sustainability efforts for instrumental reasons undermine the intrinsic reasons?

Sources

https://www.ft.com/content/edbc91f0-30f4-11e8-ac48-10c6fdc22f03

What might the implications of this be? What related signals of change have you seen?

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