‘Sustainability’ loans popular

AUCKLAND: Westpac New Zealand has made its first foray into a sustainabilitylinked loan, lending $50 million to Contact Energy.

The fouryear facility is the first such loan issued by Westpac NZ, and follows a similar move by ANZ Bank New Zealand, which transferred an existing $50 million committed fouryear revolver loan with Synlait Milk into an environmental, social and governance (ESG)linked loan last year.

‘‘Sustainabilitylinked loans are an incentivebased tangible tool for companies to demonstrate their sustainability commitments to stakeholders and the public. Globally, a growing number of companies are aligning their sustainability performance with their cost of capital,’’ Westpac NZ’s head of sustainable finance Joanna Silver said.

At the Australian parent bank’s annual meeting late last year, Westpac said it has ‘‘long recognised’’ the threat of climate change. Data from analysis firm Environmental Finance showed the global sustainabilitylinked loan market grew from $US5 billion in 2017 to $US36 billion in 2018, Westpac NZ reported.

Contact Energy will receive a discounted interest rate on the sustainabilitylinked loan if it meets targets linked to its ESG rating determined by the independent ratings agency RobecoSAM.

On the flip side, Contact will pay higher interest costs if it does not meet the rating targets agreed on with Westpac NZ.

‘‘It’s a dynamic tool that rewards and incentivises performance across a range of ESG metrics. It also complements our green borrowing programme which reflects the low carbon nature of our generation assets,’’ Contact’s general manager financial services Louise Tong said.

Contact is one of three entities to have issued green bonds on NZX’s debt market. Auckland Council and Argosy Property are the other two.