“Australian Unity asks eight questions. We wanted to replicate this identically for accurate benchmarking outcomes,” explains Colin Roberts, head of sustainability at Levande in Sydney. “It provides a level of robustness to our KPI when we can benchmark directly against a well-established wellbeing index that is based in Australia.”

There are specific guidelines to use the Australian Unity index, according to Katie Newton-John, Levande’s Sydney-based general counsel. “There is quite a defined set of measurements we can and cannot use,” she says. “We met with Australian Unity's team at Deakin University to talk through and refine how we will collect data so they comply.”

Charlotte Plaisant Millecamps, Sydney-based head of sustainable finance at Westpac Institutional Bank – which was sustainability coordinator on the loan alongside ANZ and Commonwealth Bank of Australia (CBA) – says the inclusion of a wellbeing KPI stands out because relatively few sustainability-linked transactions incorporate social targets and because it is focused on residents.

“Employee wellbeing, which is important, is sometimes included but in Levande's case the wellbeing of residents is central to what it does and ranks highly in its materiality matrix. It was important for Levande to include this, in addition to addressing greenhouse gas emissions,” Plaisant Millecamps says.

Social targets can be more challenging for transaction teams to navigate due to the complexity of defining quantifiable targets. Simon Reid, director, sustainable finance at ANZ in Melbourne, says Levande took on the challenge and delivered a robust methodology.

“Levande seeks to keep residents at the heart of everything it does," Reid says. "In this context a wellbeing target made a lot of sense. Social targets are more diverse than climate in their construction, but for borrowers like Levande they are an important aspect of the material issues for the business.”

Alongside the resident wellbeing KPI, the SLL’s first target requires Levande to reduce emissions in line with the Science Based Targets initiative (SBTi)’s buildings sector criteria, starting in 2026. The other target focuses on new development activities and requires that the borrower incorporates sustainable building design practices.

Together, the targets reflect the “material priorities of our responsible and sustainable business strategy”, Newton-John comments.

Linking financing crystallises Levande's commitment to being a sustainable and responsible business, Roberts adds. “It is not just a framework on an external web page. It is tied to the absolute financial performance of the organisation,” he says.

This translated to a faster-than-usual entrance to sustainability-linked financing for Levande, says Charles Davis, head of sustainable finance and ESG at Commonwealth Bank. EQT, the Swedish company that acquired Levande from Stockland in 2022, says it was the first private-sector business to formalise science-based targets through SBTi.

“Often, newly formed companies take a few years to establish a sustainability strategy and targets, which are essential building blocks before an SLL becomes a relevant option to consider,” Davis says. “It is testament to the Levande team’s hard work since the company’s formation that it has not only implemented a sustainability strategy across its operations but has taken the extra step of putting an SLL in place to incentivise action on some of its key sustainability priorities.”

The Sustainability Linked Loan Principles (SLLPs) require KPIs to be material to a borrower's sustainability and business strategy, and to address relevant environment, social and governance challenges to the borrower's industry sector.

Newton-John says: “Not only do we run retirement villages but we are acquiring new land, building new retirement villages and redeveloping existing villages. Sustainable design is important, as is general emissions reduction. We want to be doing the right thing.”

Levande declines to disclose the SLL’s financial terms but it confirms that it will receive a discount for meeting each target and a penalty any are missed. “It is not immaterial or a nice to have,” comments Alex Smith, Levande's Melbourne-based chief financial officer. “It goes both ways, and we are very incentivised to make sure we deliver.”

Given the wellbeing KPI is a relatively new concept for the market, there is a built-in mechanism to review its ambition, Roberts adds. “It is important to us that our targets are ambitious and there are stretch elements built in to reflect this,” he says.

Nancy Wang, director, sustainable finance at ANZ in Sydney, says ANZ leaned on its experience with other SLLs to help structure the KPIs and targets. ANZ was sole sustainability coordinator for Oceania Healthcare's NZ$500 million SLL in 2022, and a joint sustainability coordinator for Summerset Group Holdings' and Metlifecare's SLLs in 2021.

“Metlifecare was a really good precedent, and it is also EQT owned,” she adds. “We were able to leverage our experience a unique sector, and provide insight on the material ESG issues.”

To some extent, though, the Levande deal required novel and bespoke work on targets. Plaisant Millecamps adds: “We had to work out what was realistic, layer this with what was ambitious and push toward more,” she continues. “For the first two targets, we found agreement on what was realistic for development activity and emissions reduction. Setting wellbeing was more challenging and we worked with the team to understand its plan to improve the wellbeing of residents, the basis on which this will be assessed and activities organised, and to ensure the robustness of methodology.”

Likewise, an update to the SBTi building sector standard in October – while SLL preparations were still in progress – presented a challenge. While manageable, Davis says Levande's pivot to adopt the new SBTi standard was a “exemplary step”.

Though incoming mandatory reporting requirements are sometimes described as a roadblock to sustainable financing – as businesses are focusing delivering disclosures and thus have limited bandwidth to manage novel financing transactions – Roberts says it is the opposite for Levande.

Levande expects to fall into the second cohort for mandatory climate-related financial disclosures, he explains – which means it will not need to report until 2027. In this context, Roberts says going through the SLL process helped the borrower prepare for its future reporting requirements.

The SLL includes a second-party opinion from DNV to confirm alignment with the Asia-Pacific Loan Market Association SLLPs and will have ongoing verification and validation requirements. The SLL’s carbon reduction target has parallels to its disclosures, Roberts notes, as will ongoing verification to mandatory reporting's “limited and reasonable” assurance components.

“It is not all hard yards and a standalone, separate activity. It dovetails nicely into what we are going to need to report on as part of disclosures down the line,” Roberts says. “We did not view it as an onerous undertaking – it is part of our journey and strategy to execute and demonstrate that we are absolutely a responsible and sustainable business.”