Chile’s pulp and paper pioneer sets a new sustainability standard

The global pulp and paper industry is becoming less carbon-intensive as it grows. Final energy use grew by 0.1% on average between 2010 and 2019, according to the International Energy Agency (IEA), even as paper and paperboard output increased by 0.3% annually¹. This has been helped by switching energy sources away from fossil fuels, with an estimated 40% of total power use now drawn from bioenergy and alternative fuels.

But the sector still has a way to go if it is going achieve net-zero emissions by mid-century. The IEA believes recycling will need to increase by 60% by 2030 for that to happen, while growth in energy consumption must be limited to 0.5% annually in the years to 2050.

For Chile-based pulp and paper multinational, CMPC, reducing emissions and wasted water across its 1.3 million hectares of forest assets in Chile, Brazil and Argentina and its industrial assets in Chile, Brazil, Argentina, Colombia, Ecuador, México, Perú and Uruguay is a business priority. To ensure that it plays its part in tackling climate change, CMPC has committed to comprehensive sustainability goals including reducing direct and indirect (Scope 1 and 2) greenhouse gas emissions by 50% by 2030 and industrial water use by 25% by 2025, both from a baseline set in 2018².

Ambitions aligned

To help finance the changes needed to follow this net-zero path, in April this year CMPC arranged a US$500 million senior unsecured Sustainability-Linked Loan with HSBC, and a group of another 5 banks, that aligns the company´s cost of borrowing with progress toward its climate goals.

Under the terms of the loan, interest paid on the facility will fall by as much as 5 basis points if CMPC meets a series of pre-agreed Sustainability Performance Targets (SPTs) relating to CO2e emissions and industrial water use intensity. If the company falls short of these targets, though, the rate will rise by up to 5 basis points.

These SPTs relate directly to the company’s climate commitments and are based on projected progress toward its 2025 targets, which apply across all subsidiaries in eight countries. They will be adjusted annually in consultation with an independent third-party assurance services provider.

HSBC acted as a Mandated Lead Arranger on the transaction, which was originated and executed through close collaboration and leveraging the international network between HSBC’s teams in Chile and Singapore.

CMPC has a long track record in the sustainable finance market. Among other landmarks, it was the first Chilean company to issue a green bond in 2017 and raised its first green loan in 2019. Last year, the company issued its first sustainability-linked bond³.

“CMPC has once again demonstrated its leadership in using financing to support its sustainability goals,” said Pierre Julien Loriquet, Head of Global Banking at HSBC. “By working with our client across the world, HSBC has helped deliver a loan facility that provides a great example of best practice for the sector.”

As well as its initiatives to manage emissions and water usage, CMPC has policies to reduce by-products going to landfills through waste reduction and recycling, as well as a commitment to add 100,000 ha to the existing 320,000 ha it has set aside for conservation in Chile, Brazil and Argentina⁴. The company also has an A ranking CDP accreditation for Climate Change and Forestry, and A- in Water, in 2021⁵.

With demand for pulp and paper products remaining strong, CMPC’s innovative use of financing shows how the sector can deliver more sustainable growth. HSBC is committed to helping it continue this pioneering work.