Singapore’s Olam secures $500m sustainability-linked club loan

Fifteen banks are backing the innovative scheme, which will allow the group to pay lower interest rates once it meets a set of ESG targets.

Singaporean agri giant Olam has clinched $500 million in financing from a club of 15 European and Asian banks.

The group bills the transaction as Asia’s first sustainability-linked club loan, in which the cost of financing is tied to ESG metrics. Sustainalytics, a corporate governance research and ratings provider, will measure Olam’s progress against a set of ESG targets on a yearly basis; interest rates will be “subsequently reduced” if objectives are met.

Sunny Verghese, the group’s co-founder and chief executive, said he believes the deal “will serve as a catalyst in further developing sustainability-linked financing in the region.”

Participating banks, which will be contributing in even measure, include ABN Amro, ANZ, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Commerzbank, Commonwealth Bank of Australia, DBS Bank, The Hong Kong and Shanghai Banking Corporation, ING, Mizuho, National Australia Bank, Natixis, Rabobank, Standard Chartered and UniCredit.

ING is acting as sustainability co-ordinator and BNP as facility agent.

The news comes just months after Olam secured a $150 million loan from the European Bank for Reconstruction and Development. The money was earmarked for expanding the group’s operations in Egypt, Georgia, Poland, Turkey and Ukraine.

In May 2016, the Temasek-backed business had already received a $175 million loan from the International Finance Corporation for its processing facilities in India and Nigeria.

Olam is also active in Australia, where it recently embarked on a capex program with Rural Funds Group through which the pair will invest A$120 million ($93 million; €75 million) over three years in almond orchards, including a 2,500-hectare field in New South Wales.

In September, the group sold 5,100 acres of Californian nut orchards to US REIT Farmland Partners for $110 million.