The market for sustainability-linked loans is gathering pace: a syndicate of banks led by Standard Chartered has just issued a $1.5 billion ESG-linked loan to a Dubai real estate company.
Majid Al Futtaim Group, is a privately-owned, UAE-based real estate holding company for retail, hospitality and leisure real assets. It will incur penalties if it fails to meet certain sustainability targets each year. These targets include sustainable natural resource consumption (LEED Gold certification for all its malls) and gender diversity (for women to occupy 30 percent of senior management and board roles across MAF), the company said.
Sustainability-linked loans are proliferating. Private credit giant Ares recently issued a £1 billion ($1.4 billion; €1.2 billion) loan to the RSK Group (an environmental consultancy business) with a margin linked to ESG targets.
While MAF’s loan is not directly linked to private markets (the lending group comprises “over a dozen” banks, rather than private credit firms) it shows how the market is moving on. The company described it as the largest corporate sustainability-linked loan aligned with the LSTA’s principles. The loan is a five-year revolving credit facility based on the Loan Syndications and Trading Association’s sustainability-linked loan principles, which were published in May 2021 in partnership with the Loan Market Association (the EMEA lending industry body) and the Asia Pacific Loan Market Association.