Tesco Establishes £2.5 Billion Credit Facility Tied to Sustainability Targets

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14 October 2020 | Updated 25 January 2022

Tesco Supermarket has announced the creation of a £2.5 billion revolving credit facility, with interest rates based on environmental performance indicators. 

If sustainability targets involving renewable energy initiatives, carbon emissions and food waste are met, Tesco will benefit from a lower interest rate loan margin under the scheme.

The facility replaces the company’s existing £3 billion committed facilities.

“The ambitious science-based targets embedded into Tesco’s sustainability linked loan demonstrate how sustainable finance can be an accelerator for the progressive decarbonisation of a business.”

–Anne Marie Verstraeten

UK Country Head, BNP Paribas

Ambitious Environmental Targets

Under the terms of the agreement, Tesco will benefit from a lower interest rate loan margin if the company delivers environmental targets, aligned with three existing KPIs included in its “Little Helps Plan” sustainability strategy.

This includes:

• Reduction of Scope 1 and Scope 2 CO2e emissions
• Renewable electricity sourced from on-site generation or from the grid under Power Purchase Agreements
• Food surplus safe for human consumption to be redistributed to humans or animals within UK operations

Alan Stewart, CFO of Tesco explained: “This financial instrument is a positive step in further integrating sustainability into all aspects of our business. As a founding member of the A4S CFO Network and more recently the UN Chief Financial Officers Taskforce, linking our ambitious targets with our core financing activities has always been a goal. 

“As a large retailer, we can play a key role in decarbonising the wider economy through engaging our suppliers and customers in the transition.”

Anne Marie Verstraeten, UK Country Head, BNP Paribas which acted as sole Coordinator and Sustainability Co-ordinator for the Facility, added: “The ambitious science-based targets embedded into Tesco’s sustainability linked loan demonstrate how sustainable finance can be an accelerator for the progressive decarbonisation of a business.

“For UK corporates to shift to a net-zero pathway requires collaboration and innovation across multiple sectors – including from banks such as BNP Paribas – and through mobilising our expertise across industries, we can transition together towards a low carbon economy.”

A New Addition to Tesco’s Corporate Social Responsibility Credentials

In 2017, Tesco became the first business globally to set science-based climate change reduction targets on a 1.5 degree trajectory, including committing to using 100 per cent renewable electricity by 2030. 

The retailer has also published its own food waste data annually since 2013, and called for the wider food industry to adopt the Target, Measure, Act framework of reporting food waste data.

How Can Revolving Green Funds Help FM Teams?

Energy management initiatives are key in achieving long-term carbon reduction goals but, in the current economic climate, companies may struggle to find the capital investment required to implement them. 

Utility Team have created the Revolving Green Fund, which provides businesses with interest-free funding to deliver energy-efficient projects and technologies. 

You can read more about the fund here. 

Picture: a photograph of a vegetable aisle in a Tesco store, with a close-up shot of some yellow peppers

Article written by Ella Tansley | Published 14 October 2020

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