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NAB's new coal deal adds fine print to stop miners behaving badly

Business

The NAB has broken new ground in dealing with coal projects by issuing a behaviour-based refinancing of $515 million in loans linked to sustainability

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The loan to the Port of Newcastle is a sign of how the coal and banking sectors are trying to find a way to deal with the environmental, social and governance push (ESG).

ESG issues have led to two coal projects in Queensland in the past week facing what appear to be insurmountable barriers.

Clive Palmer’s Central Queensland coal project was told it was not suitable for development because of its potential impact on the Great Barrier Reef, and Liberty Mutual announced it would not submit an environmental impact statement on its Baralaba coal project.

Last week, Stanmore Coal announced how it would move forward in an era in which banks are under pressure not to fund coal developments. Stanmore said it would start Stanmore Green, a business that would explore renewable energy in a bid to diversify but also offset its own emissions.

The deal also avoids opting for China-backed loans to fund coal projects.

NAB said that the deal with Port of Newcastle was the first sustainability-linked loan to align with the International Capital Market Association’s climate transition finance handbook.

The NAB deal included $515 million in sustainability-linked loans that included an incentive to the port of a lower margin on debt if it hits targets across a range of social and environmental metrics.

NAB said that the deal was the first sustainability-linked loan to align with the International Capital Market Association’s climate transition finance handbook.

The sustainability-linked loan was part of a broader A$666 million refinancing facility for Port of Newcastle funded by a consortium of lenders.

It included $A595 million in 2.5-year and 5-year funding and up to $A50 million in new green lending that will fund growth initiatives aimed at green building projects and diversifying the port’s revenue base.

The NAB said it was the first sustainability-linked financing by an Australian seaport and the first such loan in Australia to include a modern slavery assessment metric addressing all of the borrower’s suppliers.

The other four metrics focus on emissions reduction, mental health first aid, diversity and inclusion and achieving certified recognition against the NSW Government Sustainability Advantage Scheme.

Port of Newcastle chief executive Craig Carmody said this loan had created a way for the port to align its financing with long-term environmentally and socially responsible projects.

“NAB is helping Port of Newcastle through financial innovation. This will in turn help create a more diverse and sustainable port in the future, supporting opportunities for jobs and economic growth in the Hunter region,” Carmody said.

“Our thinking must be in decades, not months or years. That means building new economic opportunities for Newcastle. What is good for the port is also good for the economy.”

NAB group executive of corporate and institutional banking David Gall said the sustainability-linked loan was an important step for Port of Newcastle to be an even safer and more environmentally and socially responsible business.

“Behaviour-based lending provides an opportunity to help our customers create greater environmental and social impact in sectors not easily diversified,” he said.

 

 

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