Australian Securities Exchange listed aged care provider Estia Health has refinanced its existing loans with a $330 million sustainability linked loan to publicly demonstrate its environmental, social and governance commitment.
Sustainability linked loans aim to encourage organisations to be environmentally and socially sustainable and support economic activity and growth.
Estia Health’s Sustainability Linked Syndicated Financing Agreement has embedded independently assessed targets aligned to its existing sustainability strategy and linked to the following goals:
- reduction in greenhouse gas emissions
- improved resident engagement and satisfaction
- supporting employee wellbeing
- improving environmental performance in alignment with the NABERS Star Ratings for residential aged care.
The four-to-five year loan is financed by the organisation’s existing lenders ANZ, Commonwealth Bank of Australia and Westpac and includes an additional $170 million of capacity for future growth.
Estia Health chief financial officer Steve Lemlin said the loan backed up the environmental, social and governance commitment Estia has had for some time.
“It’s a more public and accountable demonstration of our commitment,” Mr Lemlin told Australian Ageing Agenda.
“There’s never been a more important time and we prefer to be setting expectations rather than following expectations,” he said
“It does put an onus on us to further support our commitments with an accountability and there’ll be a financial incentive one way or another to support that, so we’re very pleased to be able to join that movement.”
The targets are “ambitious” and “meaningful,” Mr Lemlin said.
“We’ve had them independently assessed by Ernst and Young, which is part of the criteria to have it classified as a sustainability-linked loan,” he said.
Mr Lemlin said the move was also important for the organisation’s staff and residents.
“Increasingly, the whole community is aware of the need for us all to make a contribution and I think that’s an important demonstration for us to our staff and our residents,” he said.
It is important for organisations to be accountable to their commitments and Estia Health “accepts the responsibility that goes with it,” Mr Lemlin said.
“If we achieve these goals, it will drive us to ensure that we keep these goals in mind as much as our other corporate objectives as well.”
Mr Lemlin said the organisation was pleased to be among the first in the sector to execute a sustainability linked loan.
“The SLFA incentive structure is linked to our overall business and ESG strategies and will contribute to an overall lower overall cost of capital to support continuing investment in the sector,” Mr Lemlin said in an ASX announcement.
He recommended more organisations – not just in aged care – make similar commitments.
“I can see a future where this will be quite standard. At the moment, it’s probably starting to lead the way, but that is very common in other sectors,” he told AAA.
“I wouldn’t be surprised to see that perhaps in years to come, companies who don’t go down this path might find it increasingly difficult to access finance,” Mr Lemlin said.
Main image: Estia Health Maroochydore resident Terry. Image credit: Scott Burrows