Coles are motivating themselves to reach sustainability targets. And what's more motivating than money, honey?
Coles, aka the $25 billion Aussie supermarket giant, has just canned its plastic little shop toys. Ya know, those teeny tiny plastic collectibles in the shape of TimTams and Weetbix. They're out, and some lofty sustainability targets are in.
We're talkin' reducing CO2 emissions and increasing women in leadership roles. And they've just linked around $1.3 billion worth of debt to achieving these goals.
How does that work? Well, Coles just refinanced $1.3 billion in debt to sustainability-linked loans. If they achieve these targets, they'll pay lower margins. If they don't, they'll pay higher margins. Simple.
There are green loans, which are a type of credit offered by a lender on the basis that the borrowers uses the cash for something environmentally friendly. And then there are sustainability-linked loans (SLL for short), which work using an incentive structure.
Under the terms of an SLL, the margin on the loan - which is the difference between the total value of the investment and the loan amount - is linked to the borrower's ability to meet sustainability targets.
These loans are more popular with corporate borrowers, who might not need funds for environmentally-friendly purchases, but still have green goals. Like Coles.
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