01 | THE HIGHLIGHTS – INNOVATIVE FINANCING
INNOVATIVE FINANCING
New approaches to financing First OPEC Fund syndication is followed by introduction of sustainability-linked loans
systems and supporting the livelihoods of more than 600,000 smallholder farmers across Sub-Saharan Africa.
One of the goals of the OPEC Fund’s Strategic Frame- work 2030 is the development and introduction of new products and services in close alignment with the devel- opment needs of its partner countries. The provision of financing has been expanded not only quantitatively, but also with the introduction of new instruments in 2024, which complement the OPEC Fund’s offering in key areas. The first syndication arranged by the OPEC Fund as sole Bookrunner, Mandated Lead Arranger and Facility Agent serves as an example. The loan attracted a commercial bank from a member country, Commercial Bank of Dubai from the United Arab Emirates, to provide financing to a bank in a partner country, Banco Continental in Paraguay, to boost the local economy. The syndication is structured as an A/B facility, with the OPEC Fund providing US$25 million as A-lender and Commercial Bank of Dubai contributing another US$25 million as B-lender. Banco Continental as borrower will act as a financial intermediary, facilitating access to finance for small and medium-sized enterprises and the agricul- ture sector. Strengthening these pillars of the Paraguayan economy is set to kickstart growth. A further innovation in 2024 for the OPEC Fund was the signing of its first sustainability-linked loans, integrating sustainability into its financing tools. The OPEC Fund provided a US$14 million financing as part of a US$120 million facility to help the Cocoa Touton Processing Company Ghana enhance sustainable sourcing and resil- ience for over 60,000 smallholder farmers. In a second transaction, the OPEC Fund contributed a US$40 million loan to a US$394 million package to ETC Group (ETG), one of Africa’s largest agricultural commodity supply chain managers, strengthening food
A sustainability-linked loan ties financing terms such as pricing to a borrower’s ability to meet pre-agreed sustainability and impact targets. According to the authoritative guidelines by the Loan Market Association these are the following: Energy efficiency, greenhouse gas emissions, renewable energy, water consump- tion, affordable housing, sustainable sourcing, circular economy, sustainable farming and food, biodiversity and global ESG assessments. Sustainability-linked loans embed sustainability into the financing structure, directly incentivizing companies to deliver measurable outcomes. For example, a company might commit to reducing greenhouse gas emissions from 2 tons of CO 2 to 1 ton within five years. If this is achieved, the loan terms become more favorable. Regular reporting on sustainability performance fosters greater accounta- bility, improving investors’ confidence and encouraging robust governance mechanisms. For the OPEC Fund the ETG sustainability-linked loan was also an opportunity to demonstrate its commitment to support private sector engagement for sustainable development. ETG committed to reducing greenhouse gas emissions, improving energy efficiency and expanding gender-inclusive programs for farmers. On a wider scale the loan is part of the OPEC Fund’s strategy to introduce financial products that address emerging challenges and support sustainable develop- ment. The sustainability-linked loan is both a milestone that highlights the growing focus on integrating sustaina- bility into private sector operations and a stepping stone to new operations in this area.
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