Macquarie Uni borrows $450m in sustainability linked loan

Macquarie University has negotiated the largest sustainability linked loan made by an Australian higher education institution – a $450m borrowing facility with built-in incentives to reward the university if it achieves environmental and social goals. Macquarie stands to gain savings of up to $500,000 across the next five years if it achieves a set of sustainability targets. It will direct the savings to providing scholarships for disadvantaged students. The university has agreed with the four banks behind the loan – Commonwealth Bank, ANZ, HSBC and Bank of China – on the six targets it aims to meet across the next five years. The targets are: two separate goals for further reductions in carbon emissions; restoration of campus bushland including endangered turpentine-ironbark forest ; a boost to school students’ STEM education in the university’s Junior Science Academy; meeting gender-equity targets for academic staff; and training for staff and students in First Nations awareness and UN sustainable development goals. Macquarie vice-chancellor Bruce Dowton said the sustainability-linked loan was part of the university’s effort to make meaningful inroads on the sustainability challenge. It is the third Australian university to do a deal with its lenders to gain a benefit for meeting sustainability targets. In 2020 RMIT University said it was the first higher education institution in Australia, and possibly the world, to make a sustainability-linked loan. The three-year, $100m loan was structured to reward the university with a pricing benefit if it met goals on carbon emissions and water consumption and to penalise the university if it failed to meet them. Monash University followed last year with a five-year, $105m sustainability-linked loan facility from ANZ and Westpac with benefits for the university if it met targets to reduce carbon emissions; to reduce the amount of waste going to landfill; on the number of first-year students who completed an overseas study program; and on the number of staff and students completing First Nations cultural awareness training. Sustainability-linked loans are becoming increasingly common in the corporate sector, with banks willing to effectively subsidise environmental and social goals. Macquarie vice-president (finance and resources) Robin Payne said the loan facility was two-way, with benefits for meeting the targets and penalties if they were missed. The potential savings also depend on how much of the loan facility the university draws down across the five-year period. Mr Payne said Macquarie’s $450m sustainability-linked loan was unusual in the number of goals that had been set. “Most loans like this have one, two or maximum of three areas. We wanted to cover a much broader range of the UN sustainable development goals,” he said. Regarding its carbon reduction goals, the university says it has already achieved a 90 per cent cut in scope one and two carbon emission – the easiest types to achieve. Scope one are direct emissions on its campus and scope two are emissions from producing energy used on campus. It aims for a further 14 per cent reduction in scope one emissions and to eliminate scope two emissions. It has set a separate goal to address scope three emissions – those produced by the university’s supply chain – which are more difficult to reduce. CBA, which acted as the sustainability co-ordinator for Macquarie’s loan, said the university was leading the way in this field. “The broadness of the scope of the KPIs, which include emissions, social and biodiversity targets, and the materiality of these goals to the university’s operations, show how sustainability-linked loans can support issuers to achieve their ambitions,” CBA executive general manager, global client solutions, Deborah Leerhsen said.