Banking on sustainable finance: How a palm oil giant optimises cash flow and meets ESG goals
In unveiling a unique financial arrangement in partnership with Musim Mas, Standard Chartered has demonstrated how it can better manage finances for international businesses while contributing to progress for the planet
Natalya Molok
BLENDING sound financial practices with progressive business activity is at the heart of a new partnership sealed recently in Singapore. In May this year, Standard Chartered announced the implementation of a new Sustainable Account with Liquidity Management Structure for Musim Mas, a Singapore-headquartered global palm oil firm.
Hailed as an industry-leading innovation, the new financial framework is designed to optimise Musim Mas’ cash flow and working capital across its distinct business entities, while contributing to wider environmental, social and governance (ESG) activities.
In short, the solution lets firms manage daily cash needs while channelling surplus funds toward the United Nations Sustainable Development Goals.
The arrangement marks a milestone in the bank and Musim Mas’ 15-year relationship, designed to support the latter in managing working capital mismatches across its Singapore entities.
Put simply, because Musim Mas has separate and distinct entities in Singapore, the new arrangement can allow one entity facing a temporary shortage of funds, to in effect borrow from another owned entity, without these funds being considered co-mingled and incurring additional costs.
Whereas in ordinary circumstances, borrowing funds from an outside entity would involve a loan and incur borrowing costs, this new bespoke framework allows inter-company borrowing to be fully automated, without manual intervention from Musim Mas, effectively granting the company demonstrable financial and operational benefits.
Integrating a Sustainable Account with the notional pool through a sweep structure gives Musim Mas the unique opportunity to embed sustainability elements into its unique liquidity management solution.
Sustainability Account impact
Launched in Singapore in 2022, the Sustainable Account supports clients to embed sustainability objectives into their cash management while maintaining access to their funds. Balances in a Sustainable Account are referenced against Standard Chartered’s Sustainable Assets, as captured in the Sustainable Finance Impact Report.
With the 2030 deadline for achieving the United Nations Sustainable Development Goals nearing, the annual financing deficit across all 17 goals has expanded to US$4 trillion (approximately S$5.4 trillion). Standard Chartered aims to mobilise US$300 billion in sustainable finance by 2030.
As of April 2024, total Standard Chartered Sustainable Finance assets have grown 31 per cent year on year, with a current Sustainable Finance portfolio value of US$17.6 billion.
This determination is closely aligned with that of Musim Mas. “Sustainability is at the core of what we do,” says Alvin Lim, group chief financial officer, Musim Mas. “We firmly believe that a responsible business can both be profitable and good for the planet.”
“It has been a joy collaborating and brainstorming with Standard Chartered on this unique liquidity management solution that breaks the boundaries of a typical single header funded structure to embed sustainability in the liquidity management structure,” notes Lim.
“Through the co-creation, we now have a tailored solution to address the unique treasury needs of the Musim Mas entities in Singapore to enhance cash visibility and efficient use of cash for our daily liquidity requirements.”
A proud legacy of environmental stewardship
Musim Mas manages the entire palm oil supply chain, from plantations to finished products, while maintaining a proud legacy of environmental stewardship. The first major Indonesian company to join the Roundtable on Sustainable Palm Oil (RSPO), all of the group’s integrated mills with plantations are RSPO-certified.
“At the heart of Musim Mas’ sustainability strategy is our sustainability policy. First launched in 2014, the policy established the framework for our ‘No Deforestation, No Peat, and No Exploitation’ commitments,” says Lim.
Updated in 2020, the policy lays out a renewed and deepened commitment to improving the livelihoods of smallholders, workers and communities, he notes.
“Our policy applies to Musim Mas’ global operations and the third parties we work with, including suppliers and contractors,” adds Lim.
“Musim Mas also leads Indonesia’s most extensive smallholder farmer programme and complies with all leading certifications and regulations, such as the European Union Deforestation Regulation.”
Future-proofed activities
Like many leading businesses, Musim Mas has a strong global presence that covers 13 countries. Its main operations in Indonesia span cultivation, refining and manufacturing. With raw materials sourced from Malaysia and Indonesia, production plants are located across Asia and Europe, with their main research and development hosted in Singapore.
According to the company, “Such interconnected operations across the globe empower us to deliver quality and safe products while ensuring efficiency throughout the entire spectrum of our business.”
The choice of partner for this unique one-stop financial solution was therefore an astute one, affording the company access to Standard Chartered’s global presence and capabilities – and a perfect first step towards any potential liquidity management requirements in future.
Importance of innovation
For the two partners, sealing deals that blend operational efficiency with broader community benefits represents a bold and future-minded step.
“Musim Mas believes that a responsible business can be profitable, while benefiting the planet. That is why we seek out like-minded partners to drive change.”
Olivier Tichit, director of sustainability, Musim Mas
Not only has the bespoke financial arrangement future-proofed Musim Mas against potential liquidity challenges, but it has also won industry awards in doing so. The specific structure won the Best Liquidity and Investments Solution at The Asset Triple A Treasurise Awards 2024.
The Asset Triple A Treasurise (Treasury, Trade, Supply Chain, Risk, ESG) Awards recognise companies and financial institutions that have launched or implemented initiatives in corporate treasury management, trade finance, supply chain or risk management.
“We are pleased to co-create this liquidity management structure with our client Musim Mas, to enable them to effectively manage their liquidity requirements while embedding sustainability into the cash management structure.”
Wan Thonh Chow, head of banking and coverage, Singapore and Asean, Corporate and Investment Banking, Standard Chartered
“This is a testament to Standard Chartered’s commitment to lead the sustainability space with innovative solutions. We look forward to further supporting Musim Mas in their sustainability journey.”
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