OSLO- Norway's Yara has signed a $1.1 billion, five-year revolving credit facility which links the interest to be paid to its progress in reducing its carbon dioxide output, the fertiliser manufacturer said on Tuesday.

Yara is the first Norwegian company to enter into a credit facility linked to environmental, social and governance (ESG) targets.

Companies worldwide are under pressure from investors to address the environmental impact of their operations, particularly regarding greenhouse gas emissions.

Producing ammonia fertiliser requires the use of vast amounts of hydrocarbon feedstock, including natural gas.

Yara aims to reduce its greenhouse gas intensity per tonne of fertiliser produced by 10% by 2025.

The margin on the credit facility will be adjusted yearly based on Yara's progress in reducing its carbon dioxide intensity. The company can receive a discount on the interest it pays if it hits its target.

"The benefit of this is that it links to our overall carbon footprint, and it provides us with an incentive," Chief Financial Officer Lars Roesaeg told Reuters.

He declined to comment on the potential size of the discount the company could achieve.

Barclay's Bank, Citigroup, Credit Agricole and Sumitomo Mitsui coordinated the transaction, while nine other banks committed to the facility.

The credit facility, which has two one-year extension options, is not for directly funding the company's efforts to reduce its carbon footprint, Roesaeg said.

"This is part of our funding and is in place to provide the needed financial flexibility to meet our business targets and (...) overall standing requirements," he said.

Martin Norman, head of the sustainable finance campaign at Greenpeace Nordic, said that while he welcomed the initiative as a sign of big banks waking up to the climate threat, it was unlikely to make much of a dent in greenhouse gas emissions.

"I think we will see more transactions of this kind, where there are concrete targets," Norman said. "I think in many ways this makes perfect sense, it is a way to get incentives to reach climate targets, or environmental targets in general."

"At the same time... it builds on CO2 intensity and not on absolute numbers. From our perspective that's problematic," he added.

(Reporting by Victoria Klesty; editing by Sherry Jacob-Phillips and Jason Neely) ((victoria.klesty@thomsonreuters.com; +47 2331 6592; Reuters Messaging: victoria.klesty.thomsonreuters.com@reuters.net))