The US$200 million facility pegs interest rates to sustainability KPIs, giving a fillip to Singapore's responsible and sustainable finance movement.

Two of the largest home-grown Singapore companies – OCBC Bank and Wilmar International Limited (Wilmar) – have inked a deal that pegs the interest rate of the agribusiness group’s existing US$200 million revolving credit facility to its sustainability performance.

This is the largest sustainability-linked bilateral loan by a Singapore bank – one that is funded by a single lender and in collaboration with the borrower on achieving sustainability targets.

Under the agreement, Wilmar is committed to furthering the sustainability agenda based on pre-set targets for a comprehensive range of environmental, social and governance (ESG) metrics. These will be assessed annually by Sustainalytics, a global provider of ESG research and ratings.

If the targets are met, the interest rate on the facility will be subsequently reduced on a tiered basis.

This loan is an important step in the nation’s sustainability movement. It builds on the Responsible Financing guidelines issued in 2015 by the Association of Banks in Singapore. The guidelines aim to raise the bar when it comes to responsible and sustainable finance across Singapore’s banking sector.

Said Ms Elaine Lam, Head of Global Corporate Banking, OCBC Bank, “Everything that we do has to be evaluated from a long-term perspective because we are accountable to our community. Environmental sustainability is a journey. We want to be joined by as many like-minded partners as possible.             

“We are therefore heartened to have reached this agreement with Wilmar – another local institution. Having had decades-long main banker relationship with Wilmar, this partnership is especially meaningful to us. We look forward to structuring more of such bespoke financing solutions for them, and for our other customers, as we navigate the business landscape together in a responsible manner.”

Said Mr Ho Kiam Kong, Chief Financial Officer of Wilmar, “We are pleased to collaborate with a major relationship bank, OCBC, to link our sustainability improvements with our corporate financing activities. Sustainability is a top priority at Wilmar and we are pleased to be able to demonstrate that responsible business practices will lead to sustainable growth and lower financing costs. The prioritisation of ESG performance in the financial sector is an encouraging move in collective action for sustainability.”

For more information on Wilmar’s sustainability efforts, please refer to its recently released Sustainability Report 2017.