Newcastle Becomes First Australia Port with Sustainability-Linked Loan

first port sustainability financing in Australia
Bulker loading wheat in Newscatle (photo courtesy Port of Newsatle)

Published May 5, 2021 4:37 PM by The Maritime Executive

The concept of sustainability-linked financing has been growing as a means of incentivizing organizations with better terms if they achieve predefined targets for environmental performance. Several shipping companies, including Odjfell, Hapag-Lloyd, and U-Ming recently completed sustainability-linked financing, and now in a first for Australia, the Port of Newcastle became the first Australia seaport to complete financing including a range of social and environmental metrics.

The Port of Newcastle, which is the largest port on the East Coast of Australia, has been seeking environmentally and socially reasonable projects as it seeks to enhance its future prospects. Newcastle is Australia’s largest coal port, but in recent years has been seeking to diversify its cargoes which also includes fertilizer, cement, steel, wheat and other grains, bulk liquids containers, machinery, and alumina. 

Like most ports around the globe, it has come under increasing pressure to improve its environmental performance and lessen its impact on the surrounding communities. Reuters reports in 2020, the Australia and New Zealand Banking Group, which has declared its intent to stop lending to businesses involved in the coal trade, declined to participate in a refinancing for the port’s debt.

The National Australia Bank (NAB) led the development of the loan package that includes A$515 million ($398 million) in sustainability-linked loans that incentivizes the Port of Newcastle by offering a lower margin on debt if it hits targets across a range of social and environmental metrics. The elements are agreed to by the lender and borrower and validated in advance of the financing along with the establishment of specific measurable goals to judge performance against the targets.

“Behavior-based lending provides an opportunity to help our customers create greater environmental and social impact in sectors not easily diversified,” said David Gall, NAB Group Executive - Corporate & Institutional Banking. “This sustainability-linked loan is an important step for the path Port of Newcastle is taking to be an even safer and more environmentally and socially responsible business.”

The terms of the sustainability-linked financing set out five specific criteria to measure the port’s long-term environmentally and socially responsible outcomes. It is the first sustainability loan in Australia to include a modern slavery assessment metric addressing all the borrower's suppliers, as well as metrics focused on reducing emissions, mental health first aid, diversity and inclusion, and achieving certified recognition against the NSW Government Sustainability Advantage Scheme.

Another component of the overall financing includes up to A$50 million ($39 million) in new green lending. Those funds are earmarked for growth initiatives aimed at green building projects and diversifying the port’s revenue base.

Port of Newcastle CEO Craig Carmody said this loan created a way for the port to align its financing with long-term environmentally and socially responsible projects. The frameworks established for this package also position the Port of Newcastle for further sustainable debt issuance in the future.