Chinese commodities trader Cofco International has closed a US$2.1bn sustainability-linked loan that includes margins savings based on the firm’s performance against environmental, social and governance targets.
The deal, which will be the company’s core financing facility, has been signed with a consortium of 20 banks, and will be used for refinancing existing term and revolving credit facilities which mature later this year. ING, BBVA and Rabobank acted as sustainability co-ordinators, while ABN Amro acted as co-ordinator and facility agent.
Structured in line with the sustainability-linked loan principles, the financing comprises three tranches – a one-year revolving credit facility (RCF), a three-year RCF and a three-year term loan – each tied to sustainability criteria. Consultancy firm Sustainalytics has been commissioned to assess Cofco’s performance and assign a sustainability rating. If the firm meets targets, one of which notably relates to the sustainable sourcing of soybeans in Brazil, it will obtain interest discounts that will then be reinvested in further improving its performance across sustainable supply, health and safety, environment, communities and upholding standards.
According to Cofco, this deal is the first sustainability-linked loan for a Chinese commodities trader and the largest for any commodities firm.
“As a rapidly-growing international agri-business, meeting rising demand for food in a sustainable way is key to our purpose,” says Johnny Chi, chairman of Cofco International. “With our main financing now linked to sustainability performance, we fully commit ourselves to further driving sustainability into our operations and supply chains.”
This is the latest in a growing number of sustainability-linked loans in Asia. A similar deal signed by agri commodities conglomerate Olam in March last year saw 15 lenders come together in what amounted to the region’s first sustainable club loan, a US$500mn sustainability-linked RCF. Five months later, agricultural commodity giant Wilmar renegotiated its RCF with lender DBS, with terms reduced if it hits sustainability targets.
The market for sustainability-linked loans remains in its infancy, although banks are fielding increasing enquiries on such facilities from both Asian and global players. Jorge Gonzalez Jacob, global head of corporate lending at BBVA, says that the bank continues to “actively contribute to the Asian expansion of the sustainable loan market”, while Leonie Schreve, global head of sustainable finance at ING, adds: “I am proud to welcome our first Chinese sustainability-linked loan client, and I hope many more will follow.”