ESG policies adopted by Lenders, Equity Investors and Corporations are having tangible affects on business activities in the Australian market and Hilco’s analysis of assets.
A company’s ESG rating and performance has a direct flow-on effect to investor interest and on Hilco’s analysis of assets. As experts in asset valuations, Hilco Global has seen this first-hand.
In this article, Hilco Global – experts in complex asset valuations & diligence services – explores how ESG is shaping the approach to lending and investing and our analysis of assets.
Mining and Coal in particular are a clear example. Tier 1 Lenders are exiting this market forcing Corporations within the industry to seek alternate funding arrangements which inevitably increases its borrowing costs and survivability. Alternate Lenders are the beneficiaries enjoying the custom of new Mining and Coal industry clients.
Some industries are however benefiting as Tier 1 Lenders are providing for interest rate deductions if key ESG metrics are met.
Equity & Capital Investment
ESG is restricting investment. If we consider Coal again, equity investors at all levels have been restricting capital investment within the industry whether it is hesitancy by a Corporation to reinvest CAPEX in its own business, or Superannuation funds imposing an industry veto or a lack of interest from Private Equity due to fears of diminished returns, losses or inability to exit. A result of this hesitation to invest in coal is operational managers needing to increase variable costs. Contract services and the hire industry are benefiting from this shift, ultimately however the industry is following a declining trajectory.
ESG policies are changing preferred asset choices by Corporations and placing realisation of current assets at risk. For example, a move to newer technologies like electric fleets, driverless fleets and renewable energy sources, can have the effect of reducing market interest in older technology. The risk is not high for most as tangible assets age and tend to be used for its economic life. It does however factor into decisions of asset based lenders or become a problem if wanting to sell redundant assets or forced to sell assets, with this inherent obsolescence, into the resulting diminished market. Timing and the prevailing economic environment will be a critical factor.
Within the consumer markets ESG sentiment can have dramatic consequences for inventory/product sell through and leave production assets stranded. Newer Coal fired power stations may end up being a prime example of this. Again, timing is everything.
Hilco’s deep understanding of assets on the balance sheet and industry ESG drivers is supporting our clients in this changing environment.
Greg is regarded as both a highly effective business executive and market leader in developing the right solution for clients. Well known for his calm and thoughtful approach, combined with his ability to interpret financial information with judgement involving the most complex situations, Greg aims to find a creative pathway to the right solutions for his clients. Clients know Greg drives outcomes that consider their wider business objectives.
Andrew brings almost 20 years of business development experience in his tenure of his professional career. He has an in-depth knowledge of origination and strong financial oversight in structured financing and corporate lending. Andrew has been responsible for originating corporate financing solutions, managing client portfolios, developing strategic relationships, negotiating contract terms and conditions, underwriting and financial analysis for many complex Asset Based Lending (ABL) and commercial transactions. Prior to joining Hilco, Andrew most recently served as a sales leader with HSBC and previously held business development and originations positions at GE Capital where he was responsible for Asset Based Lending solutions.
Ray brings more than 25 years of business development experience in his professional banking and trading career. With in depth knowledge of origination and strong financial oversight in the structured financing and lending space, Rayhas been responsible for originating various debt markets and trade finance solutions, managing client portfolios, developing strategic relationships, negotiating contract terms and conditions, as well as underwriting and advising financial solutions for many complex commercial transactions. Prior to joining Hilco, Raymost recently served as Business Development Head – Asia region for Triterras Fintech Pte Ltd, and was responsible for originating new business, negotiating commercial contracts, as well as assisting Distribution Team with the structuring of trade financing deals.
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