National Australian Bank Ltd (ASX: NAB) shares were fairly flat in trading today, as news circled of the bank providing the world's largest coal export terminal with a "sustainability-linked" loan.
The NAB share price spent most of the day bouncing around in the red before closing just 0.07% higher at $27.25.
Let's take a closer look at the Port of Newcastle's new $515 million loan and the conditions NAB has imposed upon it.
Port of Newcastle's loan
The loan, termed "landmark" by NAB, is marked with incentives for the port if it meets environmental and social metrics imposed by the bank.
The Port of Newcastle will receive a margin reduction on the loan if it hits 5 positive sustainability, environmental and social markers. These are:
- Keeping its scope 1 and 2 greenhouse gas emissions below the 2025 trajectory level based on the port's Well Below 2-degree Scenario. This will see the port achieving net-zero energy by 2030 and carbon neutrality by 2035.
- Screening all of its suppliers for modern slavery risks. The port must also demonstrate engagement with operators where medium or high risks are identified.
- Establishing an Aboriginal and Torres Strait Islander student internship program with The University of Newcastle.
- Achieving accreditation of a number of mental health first aiders in each of its departments.
- Finally, it must demonstrate progression under the New South Wales Government's Sustainability Advantage Recognition Scheme.
Noticeably, the loan makes no judgement on the port's scope 3 emissions which would take into account the greenhouse gasses produced by the burning of all coal that passes through the port.
NAB states it is the first sustainability-linked financing of an Australian seaport and the first such loan to include a modern slavery assessment addressing a borrower's suppliers.
ABC News reported the Australia and New Zealand Banking Group Ltd (ASX: ANZ) withdrew its funding for the Port of Newcastle last year, claiming ANZ believed the port would become a financial liability as the world moves away from fossil fuels.
The NAB's loan is part of a $666 million refinancing facility for Port of Newcastle, funded by a syndicate of lenders. The funding includes up to $50 million in green lending – funding green building projects and diversifying the port's revenue base.
The Port of Newcastle is the largest port on Australia's east coast, employing around 9000 people.
Commentary from management
NAB Group's executive of corporate and institutional banking David Gall said the bank was helping businesses adapt and improve their sustainability:
This sustainability-linked loan is an important step for the path Port of Newcastle is taking to be an even safer and more environmentally and socially responsible business.
Port of Newcastle's CEO Craig Carmody said the loan would allow the port to align with long-term environmentally and socially responsible projects:
NAB is helping Port of Newcastle through financial innovation. This will in turn help create a more diverse and sustainable port in the future, supporting opportunities for jobs and economic growth in the Hunter region.
Our thinking must be in decades, not months or years. That means building new economic opportunities for Newcastle. What is good for the port is also good for the economy.
NAB share price snapshot
While the NAB share price responded mildly to today's news, the bank is sitting close to a 52-week high and is essentially at the same level it was back in February 2020, just before the COVID-19 pandemic struck.
The NAB share price 18% higher than it was at the start of 2021. It's also gained 65% since this time last year when Australia was battling the coronavirus-induced recession.
The bank has a market capitalisation of around $89 billion, with approximately 3.3 billion shares outstanding.
