The Challenge
Hind Management own and manage Sudima Hotels, an award-winning New Zealand hotel chain. Sudima wanted to make their operations more sustainable and sought finance to help them reach their goals. They needed an independent Second Party Opinion that confirmed their performance targets were ambitious and their reporting and systems were eligible to receive a sustainability-linked loan (SLL) from the Bank of New Zealand.
Sustainability-linked loans and green finance
SLLs are one type of green finance – loans and other financial products that drive sustainability improvements. Borrowers and lenders work together to develop baselines, targets and indicators for how they are performing sustainably. The targets must be ambitious and in line with sustainability best practice.
Learn more with our green finance Need to Know
For Sudima, the terms of their loan can change with their sustainability performance. If they meet the targets, they’ll receive lower interest rates; miss them and they could pay higher rates.
Finance to make changes
Kanika Jhunjhnuwala sees the benefits of the green finance. She's the Executive Director, Sustainability and Environment at Hind Management. 'We are committed to making the world a better place and our ESG initiatives in the pipeline would have been done irrespective of this funding partnership,' says Kanika.
'The benefit of this SLL though allows us to invest further while adding accountability and transparency to our stated targets, thanks to the rigour of the SLL reporting and measurement process.'
What we did
Sudima needed a Second Party Opinion (SPO) report as part of the loan process. Our thinkstep-anz experts understand green finance and are experienced in reviewing governance and setting environmental and social performance targets. A party independent of the borrower must carry out the SPO.
Our opinion checked that:
- Sudima’s governance and strategy support the loan
- the targets were appropriate
- the reviews and reporting will be transparent
- the SLL was in line with the Sustainability-Linked Loans Principles (a framework from the Loan Syndications & Trading Association)
What we found
Our SPO confirmed that the SLL aligned with the Sustainability-Linked Loans Principles. We particularly liked that it:
- was connected to Sudima Hotels’ sustainability strategy (including reducing carbon emissions in their portfolio and improvements in accessibility and responsible procurement).
- had ambitious targets and timeframes, both for reducing carbon emissions and improving social and cultural performance. This includes lifting the organisation’s cultural competency through te reo and tikanga classes.
- included third-party verifications, such as Toitū carbon certificates and Accessibility Tick compliance (two New Zealand sustainability certifications)
- used clear and consistent methods to measure and monitor performance.
Our SPO gave BNZ the independent confirmation they needed to grant the SLL.
How green finance is helping Sudima succeed sustainably
Refining sustainability thinking
The SPO process helped Sudima develop their sustainability ‘big picture’. It also reframed some of their thinking, especially around what they can measure (for example, what refrigerants does the hotel use and how can they impact the environment?) and how to best compile data.
Accessing finance to accelerate changes
The SLL allows Sudima to invest widely in improving their operations. Reporting and measuring for the SLL makes Sudima more accountable for meeting their targets and the process more open.
Becoming industry leaders
Sudima are using this process to advocate for change in the tourism industry. By engaging with their supply chain, they can improve the sustainability performance of their suppliers. They are also urging others in the industry to work together, to achieve wide-reaching changes. Kanika founded the Hotel Industry Sustainability Group to work with other accommodation providers to lift the industry’s sustainability baseline.