Trafigura innovates with the first-ever global commodities industry Sustainability-Linked Loan
On March 18, 2021, Trafigura Group Pte Ltd., a market leader in the global commodities industry, has successfully closed a sustainability-linked facility, the first for an actor in the energy & metals commodity trading industry. This operation reinforces its objective of establishing itself as a pioneer in social responsibility within the global commodities industry. Natixis acted as joint sustainability coordinator for the transaction.
The European RCF facility comprises a USD1.9 billion 365-day European multi-currency syndicated revolving credit facility, which will be used to refinance the maturing USD1.9 billion 365-day facility dated March 6, 2020, and an extended option on the 3-year USD3.6 billion tranche of its 2018 ERCF, thereby extending the facility by 365 days and maintaining a 3-year tenor.
Material & tailor-made environmental & responsible sourcing KPIs
Both the 1-year and 3-year tranches are structured as sustainability-linked syndicated facilities aligned with the LMA’s Sustainability Linked Loan Principles. Under this structure, the interest rate paid by Trafigura on the credit facilities will decrease or increase based on the group’s progress on three key performance indicators (KPIs), which are material to the commodity industry and Trafigura’s business profile while responding to significant sustainability challenges.
- The first KPI requires Trafigura to reduce its greenhouse gas emissions over the life of the facility (quantitative targets in Scope 1 & 2, Scope 3 target to be set by the end of 2023).
- The second KPI concerns the enlargement of Trafigura’s existing responsible sourcing program to cover all metals.
- The third KPI sets targets for the growth of the company’s renewable energy capacities.
A sustainability auditor of international reputation will perform the annual verification of the group’s sustainability KPIs and the CSR annual report.
By proactively integrating sustainability KPIs into its financing, Trafigura becomes the first global commodities player to tangibly demonstrate its commitment towards achieving ambitious environmental and responsible sourcing targets, reducing its carbon footprint, and diversifying its asset base towards renewable energy.
A sustainability feature well received by the loan market
This facility is at the forefront of innovation in the sustainable finance space and will undoubtedly pave the way for similar transactions in the commodity loan space. This is Natixis’s strong conviction that improving trade processes will be key “sustainable” levers to reduce the environmental impact of supply chain from responsible procurement & sourcing (better conduct of business & ethics, selection of suppliers) to less impactful logistics chain (transport & storage) that must be implemented across all global businesses networks.
The market responded very positively to the sustainability features embedded in the facility, which are rightly understood as enhancing the company’s CSR positioning and furthering its ability to gradually transform its business to reduce its environmental impact.
Link to the press release: