Deutsche Bank’s Sustainability Loan to Halcyon

Sustainability is at the heart of the USD 25m loan by Deutsche Bank to Corrie MacColl, a subsidiary of Halcyon Agri Corporation, which was announced in July. The loan is sustainably-linked with a three-year tenor and an accordion feature providing the option to upsize the facility to USD 75m.

The money will be used to maintain Halcyon's rubber plantations in Cameroon and Malaysia, furthering the company's Cameroon Outgrower Programme which aims to provide additional food security and boost the income of 13,000 local smallholder farmers. The group will be required to comply with the mutually agreed sustainability framework developed by Environmental Resource Management Singapore Pte Ltd (ERM) throughout the term of the loan.

ERM has been appointed by the Singapore branch of Deutsche Bank as a consultant and will assess and/or verify compliance with the framework. It will be responsible for reviewing the key performance indicators (KPIs) of the loan, which is another step for Halcyon as a market leader in sustainability. ESG conditions attached to loan rates are becoming more frequent, but it is the comprehensive nature of the KPIs in this loan that sets a new benchmark for the whole rubber industry and makes the loan unique.

Halcyon is one of the world's leading rubber franchises, with an integrated network spanning plantations, processing and distribution of quality rubber. It is a founding member of the Global Platform for Sustainable Natural Rubber. The company developed its HEVEAPRO rubber processing standards in 2014 and four years later its Sustainable Natural Rubber Supply Chain Policy included a No Deforestation commitment, a first for the industry.

Last year was a significant year for the Halcyon group: it signed up to the United Nations Global Compact, a non-binding UN pact to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. The same year saw Halcyon named as second most transparent rubber company by the Zoological Society of London's SPOTT (Sustainability Policy Transparency Toolkit) team, which supports the financial sector and supply chain stakeholders in their management of risk through transparency assessments of soft commodity producers and traders. 2019 was also the year in which the group launched BOUNCE, the world's first sustainable movement to drive industry and consumer change for an equitable natural rubber industry, which is anchored by the UN Sustainable Development Goals.

Deutsche Bank itself has a longstanding commitment to sustainability. It has been a member of the UN Environment Programme Finance Initiative and signatory of its Declaration of Sustainable Development since 1992, and is proud of its achievement of climate neutrality in operations since 2012. The bank also formally supports the targets set by the 2015 Paris Climate Agreement, and last year was a founding signatory of the UN Principles for Responsible Banking. Deutsche Bank has undertaken that its total volume of sustainable financing and investments will be at least EUR 200bn by 2025, and that its operations will be powered entirely by renewable energy sources by the same date. Earlier this year the bank announced the appointment of Kamran Khan to the newly created role of Head of ESG for Asia Pacific to drive the regional strategy around ESG across all the bank's business divisions in the region.

David Lynne, APAC Head of Corporate Bank at Deutsche Bank (pictured left), emphasised as the loan was announced the bank's commitment to “driving positive change through our efforts in sustainable finance”, saying that it was gratifying to work with partners such as Halcyon on the type of project which “evaluates a broader set of more environmentally conscious metrics in defining successful business”. Halcyon Agri Corporation's CFO Jeremy Loh expressed the enthusiasm of his firm for this “one-of-a-kind loan structure” from Deutsche Bank, noting that it was important for Halcyon to ensure that it supported its clients in a sustainable way, fulfilling its corporate responsibility strategy “in accordance with developing standards for sustainable financing in the rubber industry”.