Financial services firm Standard Bank and retailer Woolworths have successfully concluded the first sustainability-linked working capital facility in South Africa to the value of R600-million.
The conclusion of the facility is testament to Woolworths’ commitment to achieving bold sustainability targets and realising its vision to be one of the world’s most responsible retailers, the parties say.
The working capital facility's structure aligns Woolworths’ financing decisions with its commitment to sustainability by providing reduced interest rates based on performance against a combination of sustainability performance targets.
Further, as sustainability-linked funding ties the terms of funding to environmental, social and governance (ESG) outcomes, the facility supports and incentivises responsible corporate behaviour and the creation of shared value. The financing structure is also strongly aligned to Standard Bank’s social, economic and environmental impact framework.
“This deal is another example of our ongoing commitment to ensuring sustainability is entrenched into the heart of our business, particularly from a working capital perspective, which drives our daily operational requirements. We have committed to ensuring that all our debt going forward is ESG-linked where possible.
“Woolworths now has about 60% of our debt in line with our sustainability targets. This is our sustainability strategy in action and demonstrates our intent to making a meaningful difference for the greater good of the planet and its people,” says Woolworths Group head of sustainability Feroz Koor.
As the second sustainability-linked deal concluded with Standard Bank, but the first in South Africa, the bank stepped in as the lender and sustainability coordinator to support Woolworths’ drive to ensure responsible environmental resource management of key agreed sustainability performance indicators. These included Woolworths food, private-label fashion, beauty and home goods, as well as electricity consumption in corporate stores.
“As the first ESG sustainability-linked deal, an extensive amount of collaboration from internal stakeholders, such as our legal, credit and business teams, was required to draft the necessary ESG principles,” explains Standard Bank Consumer, Transactional Products and Services sector head Justin Dhunraj.
“With this pioneering achievement comes the confirmation of Standard Bank’s ability to evolve and exceed new client needs. Not only did the bank’s Corporate and Investment Banking and Transactional Products and Services (TPS) divisions negotiate unchartered waters with this deal by crafting its own ESG template, but its innovative solution has potentially pivoted it to the forefront of the industry,” says Standard Bank TPS global transactional banker Tania Troskie.
“Going forward, our aim is to replicate similar ESG agreements with other clients now that we have a strong base to work from,” she adds.