What our new record in sustainable finance means for you

Author: Alain Bejjani — CEO, Majid Al Futtaim — Holding

Sustainability-linked loans may sound complicated, but they are worth taking a few minutes to understand as they affect every one of us.

Simply put, they exemplify doing well by doing good. Because of our commitment to and achievements in sustainability, Majid Al Futtaim has been able to secure more competitive financing to further our business goals across our operations and markets — specifically, a US$1.5 billion sustainability-linked loan, the largest corporate, non-government linked loan of its kind in the region.

Essentially, sustainability-linked loans or SLLs link specific targets in sustainability to the terms of the loan. If we do not reach those targets, we face a penalty.

For me, those targets are the most exciting part of this record-setting loan. We have committed to three: to reduce emissions across our property portfolio by nearly 50%; to ensure all our malls are certified LEED Gold or better; and to increase gender diversity among our senior management to 30% — all by 2026, with incremental goals every year between now and then.

You — our customers, partners, stakeholders, communities and our region and our world — are the beneficiaries of these outcomes. A cleaner environment, more resource-efficient and greener malls, and greater opportunities for women is great for all of us, not only Majid Al Futtaim. This is a win-win-win.

We hope that this will be the first of many such SLLs in our region. Banks are increasingly interested to support financing that leads to better environmental, social and governance (ESG) outcomes — most have targets in this space.

The numbers reinforce this growing momentum: The global SLL market went from USD 5 billion in 2017 to USD 163 billion in 2019. This year, in the US alone, more than $52 billion worth of SLLs were funded before May 21, three times more than all SLLs in 2020.

I can only encourage other private sector leaders to consider this instrument. As our CFO Ziad Chalhoub summarised, “While a company’s profitability is important, how you contribute to sustainability is becoming more crucial and a filter for investors and where they will invest. To ensure that you have access to funding — and at attractive rates — in a world where sustainability is becoming more important, it is imperative to embrace this reality now and not be left behind.”

There are also other advantages. For us at Majid Al Futtaim, moving to an SLL more closely aligns the funding of our group to our stated sustainability goals. We are walking the talk. Our progress will also be independently verified by an external third-party, limiting any greenwashing. There is also much satisfaction in knowing that our sustainability work thus far has opened up this new avenue and given us more confidence to meet these targets.

Between the lower costs, reputational benefits, lower credit risk and long-term societal benefits, I am immensely proud not only of our Treasury and Sustainability teams for their work to achieve this goal, but of all our MAFers and all those who support us in this ongoing journey.