CBA rolls out its first sustainability-linked loan
(17 July 2019 – Australia) CBA has announced its first sustainability-linked loan, incentivising the operator of Gold Coast Airport to reduce carbon emissions.
The new financing agreement sees CBA providing $150 million of debt funding to Queensland Airports Limited (QAL) for the Gold Coast redevelopment, as part of a broader five-year capex facility agreed with a group of banks.
Of the $150 million of funds committed by Commonwealth Bank, $75 million is in the form of a Sustainability-Linked Loan (SLL), which includes the potential for a margin reduction for QAL, provided the airport meets targets linked to a reduction in carbon emissions intensity. Conversely, underperformance will trigger an increase in pricing.
SLLs tie a borrower’s cost of funding to a borrower’s ESG (Environmental, Social and Governance) rating or other sustainability metrics.
The Gold Coast Airport financing is the first in Australia to be directly linked to a reduction in carbon emissions. It is also Commonwealth Bank’s first SLL transaction and the first to align to a widely adopted carbon emission industry framework, the Airport Carbon Accreditation Program.
Andrew Hinchliff, CBA Group Executive of Institutional Banking and Markets, said: “The world is changing rapidly and it’s imperative that we are always looking for innovative solutions to help our clients navigate this change. This is a landmark transaction for QAL and for ourselves, and we are delighted to build on our 14-year relationship with QAL to bring this deal to market.
“We expect demand for these products to continue to grow as borrowers become increasingly focussed on how their investment decisions impact the environment.”
QAL Chief Financial Officer Amelia Evans said the sustainability-linked loan from Commonwealth Bank provided the company with another vehicle to continue its focus and performance in these important strategic areas.
“This loan agreement with ESG-linked incentive pricing reinforces the need for us to achieve our internal carbon emissions targets, delivering both financial and environmental benefits to QAL and our shareholders,” Ms Evans said.