French supermarket group Carrefour’s aim to be the world leader of food transition produced the biggest social sustainability-linked loan of the year, as the company amended two loans totalling €3.9bn that are linked to its pioneering corporate social responsibility initiative.
The financing is the first CSR-linked loan in Europe’s retail sector and included 17 ambitious strategic objectives or key performance indicators, with a strong social focus that underpin the four pillars of its “Carrefour 2022” transformation plan.
Carrefour acknowledges its social responsibilities in its CSR mission statement, and has incorporated objectives around tackling waste, preserving biodiversity and supporting suppliers and employees in all of its businesses, as it targets sustainable and profitable growth.
The company amended a €1.4bn revolving credit facility and a €2.5bn RCF to extend their maturities to June 2024 from 2022, and linked the loans’ pricing to its performance against a CSR and food transition index that Carrefour created last year to accelerate the move to healthier and more sustainable food.
“These CSR-linked operations … constitute another step in Carrefour’s ambition to be the leader of food transition for all,” said Carrefour CFO Matthieu Malige.
Carrefour’s CSR and food transition index was designed to measure its progress towards food transition and other sustainability targets annually and has four pillars – organic products, local producers and suppliers, waste recovery and CO2 emissions for stores and employee training.
The 17 strategic objectives and KPI targets, which range from reducing waste to gender equality, will be monitored externally and the scores averaged. The overall index performance is determined by averaging the results of the four pillars.
Carrefour also created an innovative “bonus” principle to deal with pricing step-ups or step-downs that will see the company and its banks channel any amount saved on the spread into a fund that will be used to finance Carrefour’s food transition objectives.
Carrefour’s targets were set at 102%. If it fails to hit the target, Carrefour will pay around 2bp into the fund, but if it exceeds its targets, its banks will pay 2bp into the fund by cutting the commitment fee that the company has to pay on its loans. Carrefour’s score was 104% in 2018.
The fund structure helps Carrefour and its investors avoid being seen to be profiting by missing or hitting sustainability targets and KPIs, and Carrefour is responsible for creating and administering the fund so banks are not exposed to any potential compliance issues.
The €1.4bn revolver was completed on a club basis with eight banks and the €2.5bn revolver was syndicated to 21 banks.
Both loans have two one-year extension options that can be used at Carrefour’s request, and the transaction extended the average maturity of the company’s loans to five years from 3.1 years.
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