Westpac provides wine industry’s first sustainability linked loan

Westpac yesterday announced its support for the wine industry’s first sustainability linked loan (SLL) in the Asia Pacific.

The bank worked with Treasury Wine Estates (TWE), acting as Joint Sustainability Coordinator, Mandated Lead Arranger and Bookrunner for the SLL as part of the organisation's $1.4 billion debt facility refinancing.

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The Loan Market Association (LMA) defines a sustainability linked loan to be a loan instrument that incentivises sustainability performance objectives. These are measured using sustainability performance targets.

Sustainability targets for TWE include achieving 100 per cent renewable electricity by 2024, a comprehensive review of their water usage in FY22 and achieving equal parity of female representation in leadership by 2025, and 42 per cent representation overall.

According to Nicholas O’Brien, managing director, consumer and industrials at Westpac Institutional Bank, “SLLs are an important and increasingly sought-after tool that allows organisations to align their financing and sustainability strategies. Many investors are attracted to investing in corporates that they see to have robust sustainability strategies.”

“This is a significant step forward for TWE and leads the way for the industry. TWE have set ambitious, yet achievable, targets as it takes meaningful steps towards a more sustainable future.”

According to Addleshaw Goddard, while sustainability linked loans are similar to green loans in that they align the borrower’s performance with efforts to improve sustainability, green loan proceeds must be directed to green projects, whereas the utilisation of proceeds for sustainability linked loans is not a determinant.

“Integrating our sustainability performance with our financing framework is a really important step for both our sustainability and capital market journeys, incentivising us to move even more quickly towards achieving our sustainability ambitions and targets,” said TWE’s Chief Financial Officer, Matt Young.

The popularity of sustainability linked loans is has grown since the first SLL in April 2017, says Westpac, with the global value of SLLs in the year to November 2021, overtaking the total value in prior years since 2017.