Environmental, social and corporate governance factors are becoming increasingly important for securing financing for large value contracts in cement and mining. FLSmidth has strong competences and a long-standing cooperation with financial institutions that help customers finance their projects, while in turn ensuring that the projects make a positive contribution to sustainability
It has been almost a century since FLSmidth first cooperated with a financial institution to help a customer secure funding for their project, and countless projects have materialised due to these well-established partnerships. In the early days, the risk assessments conducted by the financial institutions only focused on the business case and the customer’s ability to pay back the loan. Today, it is a different ball game.
These days securing financing to build a cement plant or mine is increasingly dependent on how issues like safety, environmental management and human rights are handled.
“When we build cement plants or mineral processing facilities, or even when supplying equipment anywhere in the world, our financial partners expect international standards to be met. They also monitor and review customer compliance with those standards. This helps us pave the way for sustainable productivity, even though we only deliver the equipment,” says Tine Bremholm Kokfelt, Department Manager of Global Project & Export Finance at FLSmidth.
To secure their investment, our customers need to look at environmental management, the social impact on the local community and other sustainable actions
A financial partner on several projects is Denmark’s Export Credit Agency (EKF). At EKF, it is a requirement that all transactions comply not only with all applicable national legislation, but also with world-class practices such as the Equator principles, the International Finance Corporation’s performance standards for environmental and social sustainability and numerous European directives on health, safety and environment.
“We provide attractive financial solutions for many FLSmidth customers, but we also demand certain standards. By acting sustainably, these companies not only get access to money, it also helps them achieve international standards. This again opens new market opportunities for them – which secures the investment. In this way, financing has a positive impact on sustainability and vice versa,” explains Jens Hestbech, Chief Underwriter at EKF.
Joint expertise resulted in go-ahead for project
In 2018, EKF and FLSmidth partnered on a project in a developing country where EKF required a permanent change in behaviour on site to release the funds.
“At the first site visit, we encountered about 50 sustainability issues that needed to be solved. They ranged from safety gaps with personal protection equipment to not having an adequate management system in place. After we established the right communication channels, we felt that they were on the path to improve their work culture, behaviour and performance, so all red flags in order for us to release the funds have been removed,” says Jens Hestbech.