Majid Al Futtaim raises $1.25bln sustainability-linked loan

Majid Al Futtaim, a UAE mall and hotel developer and manager, announced on Monday that it had raised a USD1.25 billion sustainability-linked loan.

In line with the Loan Market Association’s Sustainability Linked Loan (SLL) Principles, the facility is pegged to reducing both its direct and indirect emissions by 2040; having all its malls certified LEED Gold or equivalent or better by 2026, and having women fill at least a third of its top leadership positions by 2026.

The deal comes at a challenging time for sustainability-linked loans. In 2022, sales are at USD$362 billion, down from its record-breaking US$506 billion in 2021, according to Bloomberg data, amidst rising inflation and interest rates and geopolitical uncertainty.

Sustainability-linked loans have also come under increasing fire over the past year, with critics attacking the vagueness of the targets, and whether the ongoing key performance indicators are either relevant to the issuing company’s core business or are ambitious enough.

The Kempinski Mall of the Emirates in Dubai

“Through the new SLL, we are further extending our accountability in how we finance our operational and capital expenditures across the Group. As our second such SLL signed in as many years, we are aligning our actions with our long-term strategic target of reaching a Net Positive business model by 2040.” Ziad Chalhoub, Chief Financial Officer at Majid Al Futtaim Holding.

Sustainability Performance Targets have been set and will be measured on an annual basis throughout the lifetime of the loan. UAE’s largest bank, First Abu Dhabi Bank, led the transaction.

Majid Al Futtaim owns and operates 29 shopping malls, 13 hotels and four mixed-use communities, with further developments underway in the region. It owns 13 hotels with 3,675 rooms operated by the Hilton, Ibis, Kempinski, Le Meridien, Pullman, Novotel, Sheraton and aloft brands.

The announcement comes hot on the heels of Majid Al Futtaim’s inaugural sustainability-linked syndicated loan in August 2021, involving more than a dozen banks.

Together, the loans elevate Majid Al Futtaim to sit amongst the global leaders in the hotel space who have made commitments to reduce their impact on the environment by setting climate-based targets.

In August this year, Hilton also unveiled a series of new ESG commitments, including reducing greenhouse gas emissions intensity by 75% in its managed hotels and by 56% in its franchised hotels by 2030. The company said its upgraded GHG emissions targets have been validated by the Science Based Targets initiative (SBTi).

In November 2021, Accor successfully placed its first Sustainability-Linked deal: a €700 million bond linked to achieving 25% reduction for its Scopes 1 (direct) and 2 (indirect) emissions and 15% reduction for Scope 3 by 2025 versus 2019.

According to the Sustainable Hospitality Alliance the global hotel industry needs to reduce carbon emissions per room per year by 66% by 2030 and 90% by 2050 if it is to hit the targets set out by the Paris Agreement.