Global food giant Louis Dreyfus Company has announced its first sustainability-linked revolving credit facility, joining a number of high-profile companies who are adding sustainability metrics to their borrowing.
The interest rate of the new US$750 million credit facility will be linked to four sustainability indicators—CO2 emissions, electricity consumption, water usage and solid waste. For each year that the company improves on those metrics, the interest rate will fall. An external auditor will validate the company’s performance.
“Our position in the food value chain puts us at the heart of some of the world’s most pressing challenges, such as the need to feed a growing world population sustainably. As a company, we are committed to fair and sustainable value creation, and with this first sustainability-linked RCF, today we are linking that commitment to our financing. It is also positive that the banking community is increasingly rising to the challenge, through novel financing options,” said Federico Cerisoli, LDC’s group chief financial officer.
The transaction was arranged by BNP Paribas, Bank of America, ICBC, ING, MUFG, Société Générale and SunTrust, and covers LDC’s North American business. The company said that it intends to implement similar structures in its Asian and Europe, Middle East and Africa businesses.
The market for sustainability-linked lending has grown dramatically over the past couple of years, as banks and their customers look for ways to incentivise sustainable behaviour. Total sustainable loan issuance was more than US$36 billion in 2018, according to rating agency Moody’s.
In May, Starbucks issued a US$1 billion sustainability bond, with some of the proceeds of the debt sale going to support social initiatives within its supply chain.
Patrick Grismer, Starbucks’ CFO, said at the time: “Our intent is that, by issuing a sustainability bond, we’re providing investors an opportunity to participate in our sustainability efforts, and our hope is that this inspires others to pursue more sustainability-related investing opportunities.”