Sudima banks on BNZ
Multi-million dollar loan to help fund investment in market-leading enviro-initiatives.
Having set the bar in 2014 when its Sudima Auckland Airport became the first hotel in New Zealand to gain official CarboNZero certification, the group, along with owner Hind Management, has taken another environmental step ahead of the pack, becoming the first in its sector nationally to partner with the Bank of New Zealand (BNZ) on a sustainability-linked loan (SLL).
BNZ’s SLLs are incentive-based loans available to encourage borrower businesses to increase their positive (and reduce negative) environmental and social impact.
Under the terms of the Sudima SLL, BNZ is extending a more than $100 million general loan to Hind Management and Sudima Hotels enabling savings made through the loan’s structure to be directed into the group’s dedicated sustainability budget, in the process helping to fund further investment in market-leading initiatives.
The loan integrates the group’s approach to its sustainability initiatives into its financing arrangements, and advances its accountability and transparency by setting specific sustainability performance targets (SPTs) for the group to achieve and report on.
The targets are set against key performance indicators (KPIs) and are designed to incentivise ambitious improvement in performance against those KPIs. Hind Management must report on their performance against the targets on a periodic basis as a condition of the loan.
A key feature of SLLs is that part of the loan’s pricing is linked to performance against environmental and/or social sustainability performance targets.
These are focused on areas that are material to the borrower’s business. Pricing may be adjusted annually depending on how the business tracks against the targets over the life of the loan.
Hind Management’s SLL connects the rate of interest it pays to finance its sustainability projects (e.g. climate change projects) with the results it achieves on those projects, for example by reducing the greenhouse gases the business generates. This then creates a financial incentive to meet sustainability targets.
To ensure the process is well-structured throughout, Hind Management works with thinkstep-anz, a sustainability firm with offices across Aotearoa New Zealand and Australia.
thinkstep’s technical experts have produced a Second Party Opinion Report on the SLL which evaluates the KPIs and related SPTs for Hind Management and confirms that the loan meets internationally recognised principles, addressing the company’s most material sustainability-related issues and leading to positive environmental and social outcomes.
The KPIs Hind Management will work towards include:
- Reduction of actual and potential emissions associated with hotel operations
- Improving accessibility standards to best in market
- Lifting cultural competency across the organisation
- Improving sustainability of supply chain in line with Ellen MacArthur Foundation with a focus on reducing plastic as signatory of the Global Tourism Plastic Initiative
Hind Management will produce annual performance reports for each KPI reviewed by a third-party confirming performance against each KPI and annual target within the SLL. These reports will be submitted to BNZ to facilitate certification.
Hind Management Executive Director – Sustainability and Environment, Kanika Jhunjhnuwala said the SLL arrangement reflects the group’s larger focus on ESG (environmental, social, and governance) strategy.
“We have publicly stated our commitment to making the world a better place and the ESG initiatives we have in the pipeline would have been done irrespective of this funding partnership,” he said.
“However, the benefit of this SLL allows us to invest further while adding accountability and transparency to our stated targets, thanks to the rigor of the SLL reporting and measurement process.
“The main KPIs Hind Management is working on through to 2025 are focused on reducing actual and potential emissions in Sudima Hotels’ operations; improving accessibility standards to best-in-market; lifting cultural competency across the organisation; and improving the sustainability of the supply chain with a focus on reducing plastic.
“We have made significant headway into our KPIs for 2022, including working with Sunergise towards installing solar panels at our Sudima Auckland Airport hotel.
“The proposed system would potentially offset over 40 percent of the daytime load at this specific hotel. We hope others in the sector can see what is possible and be willing to collaborate to share knowledge and initiatives IP for the greater good.
“I am motivated to use this opportunity to advocate for change within our industry. On our journey, I have worked with many of our suppliers to facilitate changes in our supply chain to meet the strict criteria across our hotels. I’m also calling on my peers to meet and work with us, as together we can achieve much more.”
BNZ has a goal of providing $10 billion in sustainable financing
Hind Management will produce annual performance reports for each KPI reviewed by a third-party confirming performance against each KPI and annual target within the SLL. These reports will be submitted to BNZ to facilitate certification.
Kanika Jhunjhnuwala, Executive Director – Sustainability and Environment for Hind Management, says the SLL arrangement reflects the group’s larger focus on ESG (environmental, social, and governance) strategy.
“We have publicly stated our commitment to making the world a better place and the ESG initiatives we have in the pipeline would have been done irrespective of this funding partnership. However, the benefit of this SLL allows us to invest further while adding accountability and transparency to our stated targets, thanks to the rigor of the SLL reporting and measurement process.
“The main KPIs Hind Management is working on through to 2025 are focused on reducing actual and potential emissions in Sudima Hotels’ operations; improving accessibility
standards to best-in-market; lifting cultural competency across the organisation; and improving the sustainability of the supply chain with a focus on reducing plastic.
“We have made significant headway into our KPIs for 2022, including working with Sunergise towards installing solar panels at our Sudima Auckland Airport hotel. The proposed system would potentially offset over 40 percent of the daytime load at this specific hotel. We hope others in the sector can see what is possible and be willing to collaborate to share knowledge and initiatives IP for the greater good.
“I am motivated to use this opportunity to advocate for change within our industry. On our journey, I have worked with many of our suppliers to facilitate changes in our supply chain to meet the strict criteria across our hotels. I’m also calling on my peers to meet and work with us, as together we can achieve much more.”
BNZ has a goal of providing $10 billion in sustainable financing by 2025, and the bank sees its leading SLLs as a key part of reaching that goal.
BNZ Head of Sustainable Finance, said the bank was delighted to be working with Hind Management on this landmark Sustainability-Linked Loan transaction in the tourism sector.
“Hind are showing real leadership in the breadth of environmental and social targets they’ve integrated into their borrowing, and they’re setting the benchmark for others in the sector.
“This deal will make a real difference in the communities they operate in and to New Zealand.”
Mike Parker-Brown is a UK-trained and qualified journalist and an award-winning travel communicator with more than 30 years experience.
Since 2002, Mike has worked as a freelance writer and PR consultant providing his services to major organisations in Australia and internationally in the tourism, aviation, hospitality, recruitment and export marketing sectors.
