CBA inks first of a kind bilateral sustainability-linked ESG loan
(13 March 2020 – Australia) Commonwealth Bank (CBA) and Wesfarmers have signed an A$400 million three-year bilateral sustainability-linked loan, the first in Australia to be linked to achieving better social outcomes and the highest value single lender loan facility.
The new sustainability-linked loan transforms an existing Wesfarmers facility by incentivising enhanced environmental outcomes by reducing carbon emissions while also through a commitment to increase Indigenous employment opportunities. Sustainability-linked loans tie a borrower’s cost of funding to their environmental, social and governance (ESG) performance. By meeting explicit targets linked to reduced carbon emissions intensity and Indigenous employment, Wesfarmers will receive a margin discount on their loan. In the event material underperformance occurs and the targets are missed by a significant margin, this would trigger an increase in pricing.
The Wesfarmers loan follows an A$75 million sustainability-linked loan to Queensland Airports to directly reduce carbon emissions that was announced in 2019.
“ESG considerations are very much a top priority for many Australian businesses today, with sustainability really being thought of as a core part of investing for growth. At the heart of it, sustainable finance incentivises improved organisational behaviours that build a better Australia and lead to more sustainable outcomes. It’s been great to collaborate so closely with Wesfarmers over the last several months and superb to see them leading from both an environmental and social point of view” stated CBA Institutional Banking & Markets Group Executive, Andrew Hinchliff.
“Commonwealth Bank is committed to playing our part in driving sustainable outcomes and this includes supporting our customers’ efforts to do the same. It also makes good business sense to finance sustainable businesses for our lending portfolio and ensure a strong alignment of interests” Mr Hinchliff added.
“We were pleased to work with CBA on an innovative facility which recognises the value of investing in sustainability and reflects Wesfarmers’ longstanding core objective of delivering satisfactory returns to shareholders over the long term. We see commitment to ESG performance and sustainability as absolutely aligned with our core objective. It goes to the heart of delivering long-term sustainable value creation and it’s clear our investors, institutional and retail, see it the same way, as do the debt capital markets” Wesfarmers CFO Anthony Gianotti stated.
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