Beverage manufacturing giant Britvic has signed for a £400m loan, whereby it will pay lower margins if it delivers progress against its plastics, emissions and nutrition targets. The five-year credit facility will allow Britvic to benefit from lower margins, if it successfully delivers against its 2025 targets to replace half of virgin plastic used to make bottles sold across the UK and Ireland with recycled content; to halve carbon emissions against a 2017 baseline; and to ensure 75% of its global beverage portfolio consists of no-sugar or low-sugar products. If Britvic meets at least two of these targets, the margin will decrease, and the company will donate any saving made against the original margin to charity. On the flip side, a failure to meet any of the 2025 targets will see the margin increase and Rabobank, which is co-ordinating the loan, will donate the difference between the original and the increased margin to charity.
In similar news, Finnish forestry giant UPM has linked repayments on a €750m loan to its performance against long-term biodiversity and climate targets. The company has become the latest firm to take advantage of a syndicated revolving credit facility (RCF), with the pricing mechanism linked to its sustainability targets. The margin of the RFC is tied to two key performance indicators (KPIs): the achievement of a net positive impact on biodiversity in the company’s own forests in Finland; and a 65% reduction in CO2 emissions from fuels and purchased electricity by 2030 against 2015 levels.
According to Bloomberg data, $62bn of sustainability-linked loans were raised globally in the first nine months of 2019, surpassing 2018’s full-year total. Spanning all industries, the incentives for choosing this type of loan are clear – from lower pricing to reputational benefits and aligning with regulation. However, this can also have an impact on a company from the inside. By linking loans to sustainability metrics, social and environmental goals become interlocked with financial ones, thus becoming a business priority, rather than a “nice to have”. Britivc’s sustainability director, Sarah Webster, said the new financing agreement will “drive real behaviour change” among individuals making financial decisions. This form of borrowing reached an all-time high last year, and with businesses, charities, economists and the general public urging governments for a sustainable recovery, it is likely sustainability-linked loans will only become more prevalent.