Ahold Delhaize is winner of the ACT Deals of the Year Awards 2020 in the category ‘ESG Finance’. The Deals of the Year Awards champion the outstanding work of treasurers from around the world and their contribution to their organisation’s success. Awards are given based on work and transactions undertaken during 2020. The winners were chosen by our esteemed panel of judges, experienced practitioners from across the treasury, corporate finance, banking and advisory worlds.
As a leading voice in sustainable retail, Netherlands-based Ahold Delhaize had already integrated environmental, social and governance (ESG) credentials into its treasury policy in 2019 via the issuance of the first euro-denominated sustainability bond in the retail sector.
In 2020, the company built on that step with the launch of a revolving credit facility (RCF) designed to incentivise the maintenance of high ESG standards via a novel ‘reward or punish’ mechanism. Tied intrinsically to the firm’s broader policies on corporate citizenship, the €1bn RCF provides for either a reduced or increased margin, depending on whether the firm’s activities align with three key performance indicators (KPIs) that are core, relevant and material to food retail:
1. Food waste reduction Linked to a specific percentage drop in tonnage of waste per every €1m of food sales, in support of UN Sustainable Development Goal 12.3;
2. Carbon emissions reduction As measured by a set percentage drop in Scope 1 and Scope 2 CO2-equivalent emissions from the firm’s own operations, aligned with its 2030 goals certified under the Science Based Targets initiative; and
3. Promotion of healthier eating As measured by a set percentage of own-brand food sales from healthy products.
In November, the firm held a bankers’ meeting with the aim of introducing its ‘Healthy and Sustainable’ business strategy to 16 lenders and educating them on the rationale behind the KPIs. The outreach met with unanimous buy-in – a result of close collaboration between the firm’s sustainable retail and treasury teams in the run-up.
Alongside its ESG core, the RCF was one of the first products of its kind to include hardwired switch wording to anticipate the discontinuation of LIBOR. In a market dominated by efforts to build contingencies against COVID-19, Ahold Delhaize faced challenges with encouraging its lenders to focus and align on that aspect of the deal.
However, in light of the firm’s track record as a credible borrower with a clear IBOR reform plan, constructive legal counsels and a facility agent were able to accommodate the feature operationally. Rewarding discussions, concluded in a tight time frame, produced wording that satisfied all parties and set an example for other deals to follow.
What the judges said
“The KPIs are quite demanding, so the company has set itself a high bar across a range of business areas, rather than focusing purely on carbon offset.”