Africa-focused global conglomerate ETG has secured a US$394mn sustainability-linked loan aimed at supporting the company’s working capital needs and facilitating agricultural development across the continent.

Dutch development bank FMO and the Eastern and Southern African Trade and Development Bank (TDB) serve as joint mandated lead arrangers and lenders on the facility, which has a tenor of three years with a two-year extension option.

They are joined by several other development finance institution (DFI) lenders, including DEG, a subsidiary of German state-owned bank KfW; FinDev Canada; the Opec Fund for International Development; and Proparco, the private sector arm of France’s Agence Française de Développement.

FMO Investment Management and ILX, a Dutch emerging market asset manager, are also participants in the loan.

ETG is a diversified agricultural goods trader, selling fertiliser and other agricultural inputs to farms as well as processing, shipping and selling soft commodities, including spices, pulses and nuts.

TDB says the “loan will contribute to a more resilient and sustainable agricultural sector in Africa”.

The sustainability of the facility will be assessed annually against six KPIs, including no deforestation, reforestation, impact on smallholder farmers and women, and reduction of greenhouse gas emissions, FMO’s lead arranger for the loan Coen van Genderen tells GTR.

ETG has a margin incentive tied to meeting these targets.

The facility aligns with a similar US$115mn commercial bank-backed loan secured by ETG in March, which shares the same KPIs.

Guus Werners, senior investment officer for FMO’s syndications, says the involvement of DFIs in the loan served as a “stamp of approval” for its sustainability credentials, which played an important role in encouraging commercial investors to contribute their tranche to ETG.

This is the first sustainability-linked loan in which FMO has acted as an arranger.

Fatou Bouaré, chief finance and operations officer and key account holder for ETG at FMO, says it is the “largest ever of its kind in the African agricultural sector”.

“Few organisations have such a broad influence on African smallholders as ETG, providing them with market access and technical assistance to enhance yield quality. We hope ETG will lead by example, inspiring other multinationals to underpin their sustainability targets with a sustainability-linked loan,” says Bouaré.

Sustainability-linked loans totalled an estimated €761bn globally in 2022, according to BBVA, but the market has since tightened over fears that the targets they set may be hard to enforce and audit.