ETG secures US$394M sustainability-linked loan to boost African agriculture
AFRICA—ETG, an African-focused agricultural conglomerate, has secured a US$394 million sustainability-linked loan to enhance its working capital and foster agricultural development across the continent.
ETG supplies fertilizers and other inputs to farms and processes, ships, and trades products such as spices, pulses, and nuts. The loan is expected to bolster ETG’s efforts to build a more resilient and sustainable agricultural sector across Africa.
The Dutch development bank FMO and the Eastern and Southern African Trade and Development Bank (TDB) acted as joint mandated lead arrangers and lenders for the facility, which has a three-year tenor and a two-year extension option.
They were joined by prominent development finance institution (DFI) lenders, including DEG (a subsidiary of German bank KfW), FinDev Canada, the Opec Fund for International Development, and Proparco, the private sector branch of Agence Française de Développement.
FMO Investment Management and Dutch emerging market asset manager ILX also contributed to the financing.
Coen van Genderen, FMO’s lead arranger for the loan, highlighted that the sustainability-linked facility includes six key performance indicators (KPIs) to measure progress annually.
“This loan will contribute to a more resilient and sustainable agricultural sector in Africa,” TDB said in a statement.
TDB highlighted that these KPIs encompass no deforestation, reforestation initiatives, support for smallholder farmers and women, and the reduction of greenhouse gas emissions. ETG’s ability to meet these benchmarks will determine the margin incentives tied to the loan.
According to FMO, the loan stands out as the largest sustainability-linked financing facility in Africa’s agricultural sector, according to Fatou Bouaré, Chief Finance and Operations Officer at FMO and key account holder for ETG.
She emphasized the transformative potential of ETG’s efforts to support African smallholders, offering them market access and technical support to improve yield quality.
“Few organizations have such a broad influence on African smallholders as ETG. We hope ETG will lead by example, inspiring other multinationals to underpin their sustainability targets with a sustainability-linked loan,” Bouaré added.
The loan builds on ETG’s earlier success with a US$115 million commercial bank-backed facility secured in March, which shares the same sustainability KPIs.
The global market for sustainability-linked loans reached €761 billion in 2022, but investors’ more cautious approach has been influenced by concerns about the enforceability and accountability of such targets.
However, according to Guus Werners, senior investment officer for FMO’s syndications team, the involvement of DFIs in ETG’s facility strongly endorses its sustainability framework.
This facility also marks FMO’s debut as an arranger of a sustainability-linked loan, reflecting the bank’s commitment to promoting sustainable financial mechanisms.
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