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Netcare and Standard Bank in R1bn ‘green bond’ deal

First of its kind in Africa’s healthcare sector.
Netcare's head office in Sandton, Johannesburg. Image: Moneyweb

South Africa’s largest hospital group, JSE-listed Netcare, on Wednesday announced the launch of a sustainability-linked bond in partnership with Standard Bank, the continent’s biggest bank.

Essentially falling under the ‘green bond’ concept, the move will see Netcare access funds to support its business becoming more environmentally sustainable, through measures to reduce its carbon footprint and waste.

The bond, which is the first of its kind in the healthcare sector in Africa, represents a boost to the growing ESG (environmental, social and governance) drive among South African corporates.

Coupon rates of such bonds are linked to the issuer’s achievement of certain pre-agreed sustainability performance targets.

Targets

In Netcare’s case, the group aims to reduce its energy consumption, procure more renewable energy, reduce total carbon emissions, and further improve its water efficiency (partly by increasing its capacity to recycle grey water) at its hospital properties.

Read: Standard Bank sells green bonds in biggest African sale yet

According to Netcare, the group is also developing systems to ultimately convert all infectious healthcare risk waste (HCRW) produced on-site (at its hospitals) to inert products.

It aims to achieve zero waste to landfill, outside the HCRW stream, by 2030.

“On March 16, 2021 Netcare, with Standard Bank acting as sole arranger and sustainability agent, executed on the continent’s debut sustainability-linked bond [NTCG01]. The bond will be listed on the interest rate market of the JSE on March 19,” the group says.

“Netcare raised a R1-billion, three-year, unsecured note priced at 5.4% … If Netcare achieves its climate change mitigation and water efficiency targets linked to the bond, it will benefit from a step down in the coupon rate.”

Netcare CEO Dr Richard Friedland says the innovative sustainability-linked bond will further assist the group in achieving its longer-term goals.

Friedland notes that the group’s comprehensive environmental sustainability strategy, developed in 2013, is firmly on track to meet its 10-year targets.

Market interest

“Through the offering of the sustainability-linked bond, Netcare was able to access a deeper pool of liquidity at a compressed upfront pricing level, with the added incentive of a quantifiable future pricing benefit while investors are able to encourage positive forward looking sustainable corporate behaviour,” says Carl Wiesner, debt capital market transactor at Standard Bank.

“The large level of interest the market has expressed for this transaction demonstrates the increasing importance of ESG-driven investments in both the international and local capital markets.”

Meanwhile, Netcare says that it has already made significant progress with its sustainability programme.

“As of 2020, the company has solar installations capable of generating more than 20GWh of renewable energy and had achieved a 24% reduction in energy intensity per bed since 2013 against a goal of 22% by 2023.

“In 2020, scope 1 and 2 carbon dioxide emissions reduced by 37% from 2013.

“The progress that Netcare has made towards being a leader in environmental sustainability within the healthcare sector in South Africa, and the world, was recognised when the company achieved the distinction of being the only healthcare institution globally to have received gold awards – the highest accolade – in each of the four categories in the international 2020 Health Care Climate Challenge Awards organised by Global Green and Healthy Hospitals.”

The awards were for greenhouse gas reduction, renewable energy, climate resilience and climate leadership.

Listen to CEO Dr Richard Friedland discuss Netcare’s annual results and 2021 patient number expectations (or read the transcript here):

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At a coupon of 5.4% this is real option to further decrease renewable energy costs. I would love to hear more on how they reduced electricity consumption per bed?

This is real leadership and even the bank appears to have come to the party.

Does this mean Netcare is planning for zero carbon? Are there other companies in RSA as aggressive.

End of comments.

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