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Commodities

Singapore's Olam secures $525 million sustainability loan

Spike in green, sustainable loan deals in the last two weeks

SINGAPORE (Nikkei Markets) -- Agriculture commodities giant Olam International has secured a $525 million sustainability-based revolving credit facility, the latest in a series of green and sustainable loan deals involving Singapore over the past two weeks.

The Olam loan, which involves nine different banks, comprises three tranches - a one-year revolving credit facility for $315 million, a two-year facility for $105 million and a three-year for $105 million. The interest margin will depend on Olam's ability to meet various targets, including its success in fostering prosperous farmers and thriving communities.

The key performance indicators will be tracked and reported by Olam's corporate responsibility and sustainability team, while Ernst & Young will independently assess the achievement scores based on procedures that have been approved by the lenders.

The announcement late on Tuesday came just a day after Soilbuild Group, a local developer, said it will take up a three-year 248-million-Singapore-dollar ($180 million) green club loan to finance the redevelopment of a cluster of buildings. HSBC Singapore and Oversea-Chinese Banking Corp. were joint mandated lead arrangers for the loan.

"This (revolving credit) facility, following on from last year's $500 million sustainability-linked loan, is another demonstration of how we are embedding sustainability into all aspects of our business and financing strategy," Olam's group chief operating officer, A. Shekhar, said in a statement.

"We will continue to explore further opportunities in the green and sustainability financing space," he added.

Green and other forms of sustainable financing have become increasingly popular in recent years, particularly in Europe where concerns about the environment and corporate ethics are on the rise. Such loans incentivise borrowers to meet various sustainability targets as they would then benefit from lower interest payments.

According to dealogic, a financial data provider, the value of environmental, social and governance (ESG)-related bonds and loans amounted to $210 billion globally since the start of the year, up from $204.5 billion for the whole of 2018 and $144 billion in 2017.

RBC Wealth Management, the private banking arm of Royal Bank of Canada, said in a recent report that while the adoption of ESG benchmarks is still in its infancy in Asia, this could change rapidly as recent surveys show Asian millionaires are more likely to consider ESG factors when investing compared to their Western counterparts.

Besides the Olam and Soilbuild deals, other transactions that have been announced in Singapore over the past two weeks include a $200 million green club loan to Agricultural Bank of China's Singapore branch; a S$250 sustainability loan to City Developments to advance sustainable development goals spelt out by the United Nations; and a S$455 million green club loan to Sun Venture to fund the acquisition of a 15-storey office building in the central business district.

--Kevin Lim

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