Rand Merchant Bank (RMB), the corporate and investment banking unit of FirstRand, says it has structured a R8.45bn syndicated sustainability-linked loan for Mediclinic.
The loan offers an incentive-based pricing mechanism that rewards Mediclinic with more favourable borrowing terms provided it meets pre-agreed environment and social performance targets. The RMB sustainable finance and loan syndication teams acted as sole mandated lead arranger, debt co-ordinator and sustainability agent for the loan.
RMB says that by financially incentivising the achievement of environment and social targets, companies in Africa can align their business goals with sustainability targets in collaboration with their banks. RMB aligned the funding to Mediclinic’s goals of achieving carbon neutrality and zero waste to landfill by 2030.
Targets include a reduction in Mediclinic’s use of water resources and improvements in the experience of patients. Mediclinic’s progress towards agreed environment and social goals will be independently assessed and measured annually.
“The timely and successful refinance of our debt facilities in Southern Africa is in line with our group financial strategy and approach to responsible leverage,” said Jurgens Myburgh, Mediclinic’s group CFO.
“By managing our resources responsibly and efficiently to the benefit of our stakeholders and the environment, this innovative mechanism allows us to align our group financial and sustainability goals.”
SA banks and asset managers are facing pressure from investors and lobbyists to do more to combat climate change by making their funding for projects contingent on the achievement of certain targets linked to sustainability. That leaves them grappling with trying to balance the business imperative of delivering profits and returns with the sociopolitical need to promote environmental, social and governance (ESG) outcomes.
PwC said in a six-monthly report on SA’s banking sector that the credibility of banks’ ESG reporting will come under scrutiny as the world pushes businesses to combat climate change. The professional services firm said banks will need to go beyond the mere reporting of climate-related disclosures as stakeholders are demanding a convincing ESG strategy that is accompanied by performance measurement indicators.
“This pioneering development allows RMB to deploy its balance sheet in a way that drives ESG outcomes within its broader business universe, delivering sustainable investment and growth in Africa while also making the continent relevant to a broader global investment universe,” said Nigel Beck, head of sustainable finance & ESG advisory at RMB.
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