Indonesian Palm oil producer and exporter Apical Group announced today it has secured its first $750 million sustainability-linked loan from a syndicate of lenders with terms tied to the firm’s sustainable supply chain goals.
Palm oil is a key ingredient for food manufacturers, but sourcing the oil presents significant supply chain sustainability challenges for companies, including issues such as deforestation and labor rights. Labor rights risks in the industry include low wages, inadequate social security, unsafe conditions, unreasonable movement restrictions, limited access to communication, child labor, unequal treatment of women, and withholding of wages, among others.
Sustainability linked loans and securities are an emerging form of sustainable finance instruments, with attributes including interest payments tied to an issuer’s achievement of specific sustainability targets. For Apical’s new credit facilities, the company has committed to meet improvement targets for a range of ESG metrics based on Apical’s commitment to ensure a sustainable supply chain.
Pratheepan Karunagaran, Apical’s Executive Director, said:
“This is a milestone for Apical and a testament to the commitment and confidence we have in our ESG performance. The spirit of continuous improvement is deeply rooted in our corporate culture and we are motivated to perform even better to deliver against the loan targets set. We are grateful for the enthusiasm of our financiers and hope that our success will serve as a catalyst in further developing sustainability-linked financing in the sector.”
Apical stated that performance against the pre-determined targets will be assessed on an annual basis for the loan period, and incentives awarded accordingly. First Abu Dhabi Bank is the Mandate Lead Arranger Bank and Facility Agent for the loan.
Fawaz Abusneineh, Acting Head of Global Corporate Finance, First Abu Dhabi Bank said:
“We congratulate Apical on this achievement. ESG is an increasing focus for borrowers and investors globally and it reflects very highly on Apical being amongst the first names in Asia, and companies in its industry sector, to embrace this. I am confident that such forward-thinking commitment to achieving its sustainability goals will position Apical advantageously for the future.”