Shoprite has borrowed R2.8bn for operational and business purposes, with the interest rates linked to sustainability targets such as increasing recycling and reusable packaging, as well as cutting power and water use.
The country’s largest retailer also took out a R700m green loan from RMB, specifically for the rollout of energy-saving LED light bulbs in all its stores.
A green loan is a debt that is specific to environmental objectives while sustainability loans are ordinary debt with the interest rate linked to meeting climate or other environmental, social and corporate governance (ESG) targets. This is according to Robyn Hugo, director of climate change engagement at non-profit shareholder activism organisation Just Share.
“The green bond market has expanded enormously as the imperative to take climate action has become clearer and more urgent,” Hugo said.
The Shoprite group reported that the money was all earmarked for investment in renewable and environmental programmes. It said in a release that it had “finalised sustainability-linked loans totalling R3.5bn for investments to expand its key environmental programmes”.
But group sustainability manager Sanjeev Raghubir clarified that the R2.8bn was a “general purpose corporate facility” and “could be used for anything”, including renewable energy investment or operational expenses. The facilities include a R2bn loan from Standard Bank and an R800m sustainability-linked one from RMB.
The loans and interest rates are linked to independently audited targets related to the reduction of carbon footprints, water use and the increased rollout of renewable energy. These are set by the group along with the banks with an outside party used to measure compliance.
Facing rising power costs and an unreliable Eskom supply, retailers are stepping up the rollout of solar power on large warehouse roofs and powering refrigerated trucks with solar panels to cut the cost of diesel.
Raghubir said banks were under pressure by investors to ensure loans were used for good business purposes, with targets putting environmental objectives “in black and white”.
“It’s not a voluntary or a nice-to-have any more. There is an element of reputational risk ... if we don’t achieve our targets on environmental sustainability.”
The targets will be made available to investors who ask and are reported on in the group’s sustainability reports.
Hugo said to prevent greenwashing and ensure the loans are genuinely improving environmental objectives, “the definitional elements of the targets have to be crystal clear and compliance robustly monitored”.
“Truly green or sustainable bonds are important and useful mechanisms to invest in climate imperatives, but are, of course, no substitute for companies setting credible climate science-aligned targets to reduce their emissions,” she said.
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