RGE, a Singapore-headquartered multinational group of resource-based manufacturing companies, today announced the closing of a three-year, US$1 billion Sustainability-Linked Loan (SLL) for its sustainable agribusiness group consisting of Asian Agri and Apical.
The SLL, which includes a US$150 million Murabaha term facility that is AAOIFI-compliant, marks RGE’s inaugural sustainability-linked Islamic financing and serves as a catalyst for the company’s continued strategic expansion into key regions, including the Middle East where its local operations are witnessing exponential growth.
The US$1 billion SLL will be used to support RGE’s agribusiness’ operations, growth and expansion across its diverse product offerings to further contribute to the bioeconomy. It is also tied to key performance indicators (KPIs) to enhance: Engagement with the number of suppliers carrying out independent traceability verification, Utilisation of energy derived from renewable and clean energy sources, andCollaboration with NDPE[2]-compliant suppliers.
By embedding sustainability throughout the entire traceable and transparent supply chain, from cultivation to consumption, Asian Agri and Apical will enhance the value for its customers and partners, offering them environmentally and ethically sustainable products. This commitment aligns with the key actions discussed at the recently concluded COP28, where accelerating decarbonisation and pace of change is pledged by the heads of states and private sector leaders.
Independently validated by a third-party sustainability consultant, the pre-agreed environmental performance targets or KPIs for the SLL have been set as a tool to help the company better align its efforts to accelerate the achievement of its sustainability targets. In the event that the company is not able to meet the KPIs that are set as part of the agreement for the financing, it will have to pay a higher interest rate on the loan.
RGE secured its first SLL in 2021 and has committed to 100% of its financing needs to SLLs. Its latest SLL garnered strong support from its financing partners comprising a consortium of eight Mandated Lead Arrangers and Bookrunners (MLABs), and was 1.4 times oversubscribed on its US$1 billion amount. Through this transaction, RGE has fortified relationships with existing financing partners and established new partnerships with a number of financial institutions in the Middle East.
To fully hedge the interest rate risk of the SLL, RGE also added a Sustainability-Linked Derivative (SLD), an interest rate swap[3], for its SLL. The US$1 billion SLD is also linked to the company’s achievement of the same pre-defined KPIs as the SLL. If these environmental performance targets are not met, the company will need to payback a pre-agreed amount to the banks.
When RGE introduced its first SLD to partially hedge the interest rate risk of Apical’s SLL in early 2023, it said that the SLD facilitates an even greater level of accountability from the company and reiterated its confidence in delivering on its commitments.
Patrick Tan, Head of Banking, RGE, said: “This transaction is meaningful in three ways. First, it is testament to the confidence that our financing partners have in our growth story, and in the positive impact we continue to make on our sustainability journey. Second, the inaugural sustainability-linked Islamic financing further strengthens our relationships with Islamic financial institutions in the Middle East and shows our continued support for the region’s growth in green financing. Finally, our US$1 billion SLD, tied to the same KPIs as our SLL, is an innovative and green way of hedging interest rate risk. It also demonstrates our commitment to continue to deliver on our sustainability KPIs.”
The eight MLABs appointed are Commercial Bank of Dubai PSC (CBD), E.SUN Commercial Bank, Ltd., First Abu Dhabi Bank PJSC (FAB), Hua Nan Commercial Bank, Ltd., Industrial Bank Co., Ltd, MUFG Bank, Ltd. (MUFG), Shanghai Pudong Development Bank Co, Ltd. and Bank of Communications (Hong Kong) Limited.
MUFG is the Lead Sustainable Finance Advisor on the transaction, with CBD and MUFG as Joint SLD Coordinators, and FAB as the Islamic Advisor. As one of the largest global producers in the bioeconomy where the source material for life’s essential goods is manufactured into products used by billions of people every day, RGE is dedicated to responsible growth and expansion and has transitioned all its financing to SLLs. In the year ended 2023, RGE has successfully secured in excess of US$1 billion of SLLs.