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Best ESG Solution Winner: Agrocorp International

Published: Apr 2021

 

Photo of Rahul Jain, Agrocorp International.

Rahul Jain

Group CFO

Founded in 1990, Agrocorp International is one of the leading integrated agricultural commodity and food solutions providers in the world. It has ten processing facilities, serves customers in over 50 countries and employs more than 500 staff.

ESG-linked facility covenants and sustainability metrics provide training for farmers in Myanmar

The challenge

Agrocorp is executing a digitalisation and sustainability transformation in parallel to the company’s high growth business strategy. It believes that the former enables the organisation to deliver on the latter in these times of rapid and fundamental change in the commodity and food industries. Sustainable financing was a key piece of this ambition.

“We found the perfect partners in FMO, a Dutch entrepreneurial development bank and Rabobank, who provided attractive and committed funding to support our vision,” says Rahul Jain, Group CFO.

The solution

Agrocorp signed a committed three-year borrowing facility with FMO and Rabobank to finance prepayments, inventory and receivables. The term sheet includes environmental, social and governance (ESG) linked covenants that the company work with a bank appointed third-party consultancy to set and monitor annual sustainability targets and reporting requirements. These will include the establishment of farmer training programmes in markets such as Myanmar and adding sustainability metrics as part of the customer and supplier know your customer (KYC) process.

Best practice and innovation

Adding sustainability linked covenants to the borrowing facilities that finance the core functions of Agrocorp’s origination business, namely farmer pre-payment and inventory management, perfectly aligns its commercial interests with its values and corporate social responsibility towards the community.

The solution benefits the company’s internal and external stakeholders. This industry leading initiative in cooperation with its banking partners runs in parallel to its award-winning implementation of blockchain based supply chain ecosystem. These complement each other perfectly and form key pieces in Agrocorp’s business transformation towards a more sustainable food industry. The borrowing facility benefits the financial aspects of how it sources its raw products from farmers. The blockchain solution benefits the operational aspects of how it moves goods from farmers to processors and consumers. This holistic approach affects its entire business instead of just a single transaction or use-case and makes this a true game-changing, innovative solution for Agrocorp.

Key benefits

  • Lower financing costs and better terms.
  • Cheaper and more reliable source of funding.
  • Improved stakeholder relationships and corporate profile.
  • Strengthened local origination business.
  • Building a track-record of sustainability linked transactions.
  • Employee satisfaction and productivity increase as the contribution to society becomes deeper and more transparent.

“In essence, this facility is Agrocorp’s next step in putting sustainability aspects at the core of our business. Our commitments made in the ESG-linked facility covenants guide our relationships with farmers, suppliers, buyers, financiers, employees and communities. It links our commercial interests with our corporate social responsibility and sets an industry-leading example of how we can create a responsible and sustainable food industry. It is an important building block in our vision of a better tomorrow and its integrated with our initiatives like the blockchain based supply chain ecosystem. By embracing technology this has not only provided us with economies of scale but also made us a partner of choice with financial institutions, buyers and sellers,” explains Jain.

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