This is COFCO International’s second sustainability-linked loan (SLL). The company had announced a $2.3bn SLL in July 2019, which was the largest such loan for a commodity trader.
Seven lenders, including major banks in China and Australia, have agreed to provide financial incentives in the form of lower interest rates for the Chinese owned company to achieve pre-agreed sustainability targets covering the traceability and socio-environmental screening of its Brazil soy supplies and overall Sustainalytics ESG rating.
All margin savings will be used to fund the company’s own sustainability initiatives. ANZ and BBVA are joint sustainability coordinators while BBVA is also the documentation and facility agent.
Law firm, Addleshaw Goddard, in an industry briefing, says that having an SLL can demonstrate to investors, customers, suppliers and employees that you are taking sustainability seriously, potentially increasing opportunity and providing a competitive edge.
"To reap the reputational rewards of having an SLL, the ESG metrics included in it need to be both relevant to the business and ambitious."
In its most recent sustainability report, published in June 2021, COFCO International outlined how it had achieved its palm oil and soybean traceability targets under that first sustainability-linked loan.
It stressed also how it has been collaborating across the value chain to create systemic change and build farmers’ capacity to adopt sustainable, climate-resilient practices.
“Our sustainable soy sourcing policy defines the requirements for soy suppliers on issues from conserving natural habitats to protecting indigenous peoples and labor rights and helps to manage risk in our supply chain.
“We also have a major focus on traceability as a mechanism to identify pressing social and environmental risks in our supply chain. We aim to achieve full traceability in Brazil among farms from which we source directly by 2023.”
The agribusiness giant said it has continued to verify supplier compliance with its policies, building on the extensive risk assessment it began in the Amazon and Cerrado in 2019.
“This effort is part of our collaboration with The Nature Conservancy and WWF, through the Collaboration for Forests and Agriculture (CFA) initiative. We identified 10 and 13 high risk municipalities in the Amazon and Cerrado, respectively, which we have prioritized for supplier engagement.”
To help it meet market demands for soy free from native vegetation conversion, the trader has also introduced the COFCO International Conversion Free Soy Standard.
“Working with the International Finance Corporation (IFC), a member of the World Bank Group, we are taking action to develop a more traceable and sustainable soy supply chain in Brazil’s Matopiba region. In 2020, we mapped and analyzed 357 supplying farms covering nearly 428,000 hectares. We also continued to participate in the Soft Commodities Forum (SCF) to help eliminate native vegetation conversion in our industry’s Cerrado soy supply chains.
“In 2020, we achieved the group goal of 100% traceability in all 25 priority municipalities ahead of time and completed social and environmental risk screening in supplying farms.”