HSBC Bank USA, part of the HSBC Group, will begin offering sustainability-linked loans (SLL) that will enable U.S businesses to tie their borrowing to activities that support sustainability initiatives.
HSBC’s SLLs will be available in a variety of corporate loans and credit facilities, with terms linked to pre-determined sustainability performance targets (SPTs). Achieving SPTs will result in a lower interest expense, effectively bringing financial incentives to a borrower’s sustainability strategy.
In partnership with clients, HSBC will structure SLLs in accordance with the Sustainability Linked Loan Principles, which are voluntary global guidelines set by the independent Loan Market Associations, whereby SPTs are to be meaningful and ambitious for a business and performance is verified and reported regularly.
“We want to provide loans and access to credit in ways that meet the needs of American businesses, from financing growth and investment, to support their sustainability strategy,” Julie Bennett, head of the ESG and strategic solutions group in the Americas at HSBC Global Banking, said. “SLLs are another example of how we are embedding sustainability into our products and services, including access to capital markets, lending, transaction banking and advisory services.”
Examples of SPTs include greenhouse gas emission reduction, use of renewable energy, diversion of waste from landfills and reduced water use, as well as social and diversity metrics like increased workforce diversity.
Mercon Coffee Group partnered with HSBC in a coffee-only sustainability-linked revolving credit facility. Mercon is aiming to make its supply chain as sustainable as possible — from water and forest conservation and farm management to implementing the best social practices in their producers’ coffee plantations — and this syndicated facility will help to fund Mercon’s sustainability goals through its sustainable production program LIFT. The interest cost of the facility is linked to Mercon’s performance against defined environmental and social SPTs, and HSBC will reduce the interest rate on the loan when Mercon meets these SPTs.
“Approximately 125 million people worldwide depend on coffee for their livelihood, and 25 million small farmers producing 80% of the world’s coffee,” Tony Nanez, North American head of commodity finance for HSBC Global Trade and Receivables Finance, said. “HSBC is proud to support Mercon in its mission to support these farmers through our participation in their syndicated sustainable-linked financing facility.”
HSBC will host a LinkedIn Live broadcast, “How to drive your ESG strategy: Lessons from coffee and cargo”, today at 12 p.m. EST. The panelists will be HSBC clients Juan Pablo Ibarra, COO at Mercon Coffee, and Matt Borys, treasurer and head of capital markets at Atlas Corp (parent company of Seaspan), who will be talking about their overarching ESG strategies and how they are forging new paths in sustainable finance. The discussion will be moderated by Kelly Fisher, U.S. head of corporate sustainability at HSBC.
“By linking environmental and social sustainability targets to interest payments on in loans and credit facilities, we are mobilizing finance and supporting clients such as Mercon to achieve their sustainability vision,” Fisher said. “Offering SLLs is part [of] our commitment to not only play our part in, but lead the global transition to net zero as a provider of responsible banking services.”