Commonwealth Bank of Australia announces first sustainability-linked loan
The operator of Gold Coast Airport will be incentivised to reduce carbon emissions under an innovative new financing agreement with the Commonwealth Bank.
The Commonwealth Bank of Australia has agreed to provide $150 million of debt funding to Queensland Airports Limited (QAL) for the Gold Coast Airport redevelopment, as part of a broader five-year capex facility agreed with a group of banks.
Of the $150 million of funds committed by the Commonwealth Bank, $75 million is in the form of a sustainability-linked loan (SLL), which includes the potential for a margin reduction for QAL, providing the airport meets targets linked to a reduction in carbon-emissions intensity. Conversely, under performance will trigger an increase in pricing.
SLLs tie a borrower’s cost of funding to a borrower’s Environmental, Social and Governance (ESG) 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 the 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.
“The Commonwealth Bank is committed to playing our part in limiting climate change to below two degrees, and this includes supporting our customers’ efforts to reduce their own carbon emissions.
“Developing sustainability-linked lending products for our government, financial and corporate customers is a big step in the transition to a low-carbon economy.
“We expect demand for these products to continue to grow as borrowers become increasingly focused on how their investment decisions impact the environment.”
QAL Chief Financial Officer, Amelia Evans, said the sustainability-linked loan from the 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-emission targets, delivering both financial and environmental benefits to QAL and our shareholders.”
The global market for SLLs continues to grow as companies seek to improve their sustainability performance.
The Commonwealth Bank is committed to developing innovative solutions to help those customers who are looking for greener, energy-efficient opportunities. In May, CEO Matt Comyn announced a Green Mortgage Initiative for home buyers that will provide $500 cashback to customers who have certified solar panels installed.