Belgian shipowner DEME has converted its entire loan portfolio of €579m ($658.3m) to sustainability-linked loans as part of its ambitious sustainability goals.
The commercial terms of loans will now be directly linked to the performance of DEME with regard to sustainability in two specific areas: work safety and low carbon fuel.
Key performance indicators (KPIs) will trigger adjustments on the interest margins applied to the loans with lenders agreeing to lower the interest rate when the company achieves its targets, while failure to do so will result in a slight increase of the interest rate.
DEME said with it often performing projects in challenging and remote environments, the first KPI requires the company to continually look to improve its safety performance.
“DEME has already introduced the necessary management systems and action plans to achieve its safety goals, but the company remains vigilant. Improving safety is never a closed chapter,” the company said.
The second ESG KPI includes a target to increase the percentage of low carbon fuels consumed by the company with it ultimately becoming climate-neutral by 2050.
In the meantime, DEME said it aims to reduce greenhouse gas emissions by 40% by 2030 relative to 2008 per unit of work.
Compatriot finance house KBC Bank acted as the sole sustainability coordinator for DEME in a transaction signed on 7 February and involving 10 banks.
The 10 banks involved include ABN Amro Bank, Banco Bilbao Vizcaya Argentaria, Belfius Bank, BNP Paribas Fortis, Credit Agricole Corporate and Investment Bank, Commerzbank, DBS Bank, ING Belgium, KBC Bank and Cooperatieve Rabobank.
Geert Wouters, head of structured finance and treasury at DEME, described the move to switch its loan portfolio into sustainability-linked loans as pioneering.
“We are proud to be the first company in our industry to introduce these important sustainability targets in all of our long-term financing agreements,” he said.
“In a strong signal to our stakeholders, we have demonstrated that we are considering our sustainability goals throughout our business, supporting this with concrete action. This is a bold step, and it shows that we are willing to accept the related financial consequences.”
Wim Eraly, senior general manager corporate banking and facility management at KBC Bank said: “We build on our existing knowledge and experience to structure and coordinate this sustainability-linked financing, guiding DEME in the selection of the sustainability key performance indicators and the target setting ensuring material and challenging targets for DEME.
“The transaction clearly illustrates KBC’s expertise in advising its clients with sustainable finance solutions to support their transition to a greener future.”
DEME’s Wouters added: “We have a long-standing partnership with KBC, and we are delighted to have been able to work closely with them to ensure the success of this transition to sustainable financing.”
