Chinese commodities trader Cofco International has inked a US$435mn sustainability-linked loan with Standard Chartered to support its agriculture supply chains in South America.
The revolving credit facility has specific sourcing and due diligence performance targets that can trigger margin savings based on Cofco’s performance.
Cofco said the deal is the first publicly disclosed sustainability-linked loan for South America’s agriculture sector to be focused entirely on social impacts.
It is also Standard Chartered’s first sustainability-linked loan aimed at social resilience.
Although South America is a major exporter of commodities such as soybeans, coffee and corn, the climate crisis and issues with labour rights is putting the sector at risk.
In December last year, the International Labour Organization and the Food and Agriculture Organization of the United Nations reported that more than 80% of agricultural employment in Latin America operates under informal labour arrangements, a practice that is understood to be a barrier to social justice and development.
“Strengthening land-use governance, responsible sourcing practices and supply chain oversight is therefore critical to maintaining long-term productivity, resilience and market access for both traders and the farmers who underpin global supply chains,” Cofco said.
The two key performance indicators of the deal are to increase volumes of grains and oilseeds certified under responsible agriculture standards, including Cofco’s own, and to strengthen supplier due diligence and labour safeguards in Brazilian soy and corn supply chains.
Cofco’s responsible agriculture standard is a sustainability certification programme available to its suppliers, who must commit to legal compliance, respecting human and labour rights, protecting community relations and ensuring environmental responsibility.
Meeting the standard involves third-party audits and farm-level traceability and satellite image assessments.
Helen Song, chief finance officer at Cofco, said the facility with Standard Chartered reinforced the firm’s commitment to responsible sourcing across the supply chain.
“By innovatively linking financing to measurable progress in certified sourcing and supplier due diligence, the structure supports the continued expansion of responsible and certified sustainable agricultural supply chains and improved market access for producers,” she said.
Wan Thonh, head of coverage for Singapore and Asean at Standard Chartered, added: “The closing of this pioneering sustainability-linked loan with Cofco International reflects our commitment to progress commerce in a way that delivers real impact for communities and supports a just transition.”
Marisa Drew, chief sustainability officer at Standard Chartered, said: “Sustainability-linked financing has principally revolved around mitigating greenhouse gas emissions and managing environmental risks and impacts of business operations.
“For Cofco International, we have used our deep supply chain expertise to structure a transaction that focuses on addressing social and resilience risks to their global supply chains.”
Cofco has secured other sustainability-linked loans in the past, including a 2022 US$1.6bn facility that featured potential margin adjustments for its ESG management score and the traceability of direct soy supplies from Brazil.
