Banks want climate targets to lend money to commodity traders

Environmental, social and governance (ESG) criteria have become a priority for bank lending to commodity traders, as lenders increasingly demand to see climate objectives when considering credit to commodity companies. oil trading, finance officials from some of the biggest traders said on Wednesday.

Muriel Schwab, group chief financial officer at trader Gunvor, told the FT Commodities Global Summit that banks are creating ESG and sustainability teams and that these are shaping up to be a new form of compliance of the future.

“We see banks that have made a clear decision not to support commodity traders or companies that don’t have a clear path and clear ambition around the energy transition,” Schwab said at the summit, as worn by Bloomberg.

Gunvor has “shifted the trade to transitional commodities,” Schwab added, as Financial Times Energy editor David Sheppard said. reports.

Tying lending to sustainability goals is the latest trend among energy companies and traders as investors demand climate goals and a commitment to reduce emissions.

Trafigura, for example, one of the world’s largest independent oil traders, earlier this year completed the refinancing and extension of its $5.5 billion European multi-currency syndicated revolving credit facility, which was its first sustainability-linked lending structure. This new sustainability-linked lending structure includes three KPIs that will be tested annually and verified by a third-party expert. These indicators include the reduction of operational greenhouse gas emissions (Scope 1 and 2), responsible sourcing of metals and the growth of Trafigura’s renewable energy portfolio.

“This demonstrates our focus on ESG and our commitment to continue our strong progress in improving ESG performance across our global businesses,” said Christophe Salmon, Group Chief Financial Officer for Trafigura.

North American energy companies have also recently structured sustainability-linked loans. Two Canadian oil companies have become the first North American oil companies to tie their credit facilities to sustainability goals.

By Tsvetana Paraskova for

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Troy M. Hoffman