Australian Agriculture’s First Sustainability-Linked Loan
In an innovative move, the Stockyard Group has signed a sustainability-linked loan agreement with Commonwealth Bank. The conditions of the loan mean that Stockyard will work towards further enhancing its sustainable reputation. If its efforts are successful, the loan interest rate will decrease.
Working towards making further improvements will involve the producer stretching itself. This will include areas such as reducing emissions, considering animal welfare, and taking care of the well-being of people. Stockyard already has a strong reputation when it comes to meeting the requirements of the priorities of the Australian beef industry. This includes working with the Australian Beef Sustainability Framework.
Now that Stockyard has obtained the first sustainability-linked loan in Australian Agriculture, there is increased urgency for the beef producer to improve further. Doing so will mean that it optimises the benefits of the loan.
Key points
- Beef Producer Stockyard Group has reached an innovative sustainability-linked loan agreement with Commonwealth Bank.
- The agreement is the first of its type in the agriculture sector and is an exciting development.
- This innovative solution gives Stockyard the opportunity to build on its already impressive sustainability record.
- More businesses and banks are likely to follow the lead of Stockyard and Commonwealth Bank. This is good news for sustainability in agriculture.
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The Background of Stockyard
Stockyard is well-recognised for its branded beef and is a leader in sustainability in the industry. It’s the first beef brand to be recognised as adhering to international standards for sustainable agricultural and livestock management, Global G.A.P.
This involves adopting several sustainable practices. These practices include:
- Low stress cattle handling
- Improved animal welfare outcomes
- Regenerative farming practices
- Health and safety innovations
- An organic compost manure program
Stockyard’s managing director, Lachie Hart, has spoken of how this already forward-thinking operation will benefit from its loan agreement with Commonwealth Bank. He stated that it will give them the opportunity to secure environmental, social, and corporate governance (ESG) recognition globally. This, in turn, will assist with securing capital and help them to attract customers in the future.
Details of the innovative loan
The three-year loan deal that Stockyard has signed is unique in the agriculture industry. Although similar loan deals are more common in other business sectors where they work well. The pricing of the loan is grouped into three sustainability related metrics. These metrics are:
- Reducing Scope 1 and 2 greenhouse gas emissions
- Improving animal welfare
- Enhancing workplace health and safety
Much of the measurement of these metrics will be based on Stockyard’s main operations at Kerwee Feedlot. The targets are set on an annual basis and are intended to be ‘ambitious and stretching’. If Stockyard’s performance exceeds the targets, the producer will get a discount off the agreed interest rate. Conversely, failure to meet the targets will result in interest penalties.
The exact terms of the agreement have not been revealed. But Lachie Hart has spoken about how much Stockyard values the extra incentive to further improve on its sustainable performance. It’s an opportunity to be part of the global solution to sustainability issues. It’s also a way of attracting further investment for the future.
Landmark lending could present more opportunities in the beef industry
The Commonwealth Bank’s Group Executive for business banking, Mike Vacy-Lyle has spoken of the bank’s excitement at providing an innovative lending solution. The landmark agreement could open the door on other such agreements that promote the sustainable future of the agriculture industry by enabling improved ESG outcomes.
Mr Vacy-Lyle stated that the bank looks forward to providing finance solutions to support other agribusinesses. This support will allow them to innovate in order to achieve better sustainability outcomes. This will enable them to gain internationally recognisable ESG credentials.
Stockyard is the first of these businesses to have entered into a sustainability linked lending agreement. The producer now has the opportunity to work towards enhancing its already impressive dedication to sustainable improvements. This will enhance its ability in securing capital and customers.
The Stockyard and Commonwealth Bank story is set to inspire other businesses and banks to follow their example. This has the potential to support the sustainability of agriculture in Australia as the innovative finance solution of sustainability-linked loans becomes more commonplace.