Wilmar becomes first palm oil company to link bank loan to sustainability performance

TAN WEIZHEN Today Online 27 Nov 17;

SINGAPORE — Wilmar International has become the first company in Asia as well as in the palm oil industry to take a loan with interest rate pegged to its sustainability efforts.

If the performance milestones are met, ING bank will reduce its interest rate for part of the loan in the following year, a joint press statement by Wilmar and ING said on Monday (Nov 27). When contacted, a Wilmar spokesman declined to disclose how much this amounts to.

The statement said that Wilmar has partnered with ING to convert a portion of its revolving credit facility of US$150 million into the “sustainability performance-linked loan”.

Wilmar’s performance will be tracked by Sustainalytics - a company that does sustainability and governance rankings and research - based on environmental, social and governance indicators.

Mr Ho Kiam Kong, Chief Financial Officer at Wilmar, said: “We believe that incorporating sustainability metrics into every aspect of our business, from daily operations to corporate financing, is key to creating value for our stakeholders.”

The statement said “the concept for this sustainability loan heralds a new approach for the green loans industry by encompassing not just environmental, but also social and governance aspects”.

Since March, ING has offered eight clients such loans. These include businesses in health technology, food and beverage, as well as the gas and electricity industries.

While loans linked to sustainability performance are relatively new, other forms of sustainability-related financing have been around for a while. For example, banks have issued green bonds which finance eligible businesses that contribute to a low-carbon and sustainable economy. According to the International Chamber of Commerce, green bond issuance nearly doubled to US$95.6 billion last year

Earlier this year, the Singapore Institute of International Affairs said it was looking at developing a set of recommendations for banks and financial institutions to adopt sustainable financing. This includes getting lenders to conduct more thorough screening of firms and their sustainable practices before issuing loans. Some of the recommendations could include better financing companies which are engaged in sustainable practices through green bonds or other incentives.

The Association of Banks in Singapore has also begun reaching out to banks to help them understand the issue, such as how they can screen companies before issuing loans.