OCBC, Wilmar deal pegs loan to green goals

OCBC is looking forward to structuring more bespoke financing solutions for customers as they "navigate the business landscape together in a responsible manner", says its head of global corporate banking Elaine Lam.
OCBC is looking forward to structuring more bespoke financing solutions for customers as they "navigate the business landscape together in a responsible manner", says its head of global corporate banking Elaine Lam.ST FILE PHOTO
A Wilmar International plantation in Sabah. The deal with OCBC involves Wilmar committing to furthering the sustainability agenda based on pre-set targets for a range of environmental, social and governance metrics.
A Wilmar International plantation in Sabah. The deal with OCBC involves Wilmar committing to furthering the sustainability agenda based on pre-set targets for a range of environmental, social and governance metrics.PHOTO: WILMAR INTERNATIONAL

Interest rate of firm's $267m credit facility linked to its sustainability performance

OCBC Bank is the latest local lender to work with corporate Singapore to step up sustainability efforts.

The bank and Wilmar International have inked a deal that pegs the interest rate of the agribusiness giant's US$200 million (S$267 million) revolving credit facility to its sustainability performance.

"This is the largest sustainability-linked bilateral loan by a Singapore bank - one that is funded by a single lender and in collaboration with the borrower on achieving sustainability targets," they said in a joint statement yesterday.

The agreement involves Wilmar committing to furthering the sustainability agenda based on pre-set targets for a wide range of environmental, social and governance (ESG) metrics.

These will be assessed annually by Sustainalytics, a global provider of ESG research and ratings.

"If the targets are met, the interest rate on the facility will be subsequently reduced on a tiered basis," it said.

Olam announced in March that it had taken out Asia's first sustainability-linked club loan - a revolving US$500 million credit facility.

DBS Bank was one of 15 banks in the club loan.

Olam, which is majority-owned by Temasek Holdings, is committed to meeting improvement targets for a comprehensive range of ESG metrics as assessed annually, also by Sustainalytics.

If pre-set improvement targets are achieved, the interest rate on Olam's loan will be reduced.

The OCBC loan is not the first sustainability-linked one Wilmar has taken out. Last November, it worked with Dutch bank ING to convert part of an existing US$150 million loan to a sustainability performance-linked loan .

If certain performance milestones involving ESG indicators are met, the interest rate for part of the loan will be reduced for the following year.

Wilmar's progress will be tracked by Sustainalytics.

Some of these indicators include programmes for biodiversity and reducing greenhouse gas emissions.

Singapore banks have been under pressure to pursue ESG goals in their lending activity.

The Association of Banks in Singapore issued responsible financing guidelines in 2015 to raise the bar for sustainable finance.

Ms Elaine Lam, OCBC's head of global corporate banking, said: "We look forward to structuring more of such bespoke financing solutions for (Wilmar) and for our other customers, as we navigate the business landscape together in a responsible manner."

DBS set up the DBS Sustainability Council last year and appointed a chief sustainability officer, while also acting as the sole book-runner for the first green bond issued in Singapore.

It issued its own maiden US$500 million green bond to the international debt market last year - Singapore's first green bond by a financial institution.

DBS has also begun to introduce ESG funds on its product shelves, and is exploring ways to create awareness and encourage green consumer behaviour through its product offerings.

Standard Chartered Bank has also stepped up its sustainable financing efforts.

Funds for clean technology reached US$1.2 billion last year, more than 50 per cent higher than in 2016, said Mr Patrick Lee, its head of global banking here.

"We are committed to increase this to US$4 billion from 2016 to 2020," he added.

The bank has helped clients issue US$2.8 billion worth of green bonds last year, up 40 per cent over 2016, to facilitate capital-raising and investment for projects with environmental benefits, said Mr Lee.

A version of this article appeared in the print edition of The Straits Times on June 09, 2018, with the headline 'OCBC, Wilmar deal pegs loan to green goals'. Print Edition | Subscribe