Green Finance: Hongkong Land Signs HKD$6.85B Sustainability-Linked Loans

Property investment and development group Hongkong Land recently announced that it signed sustainability-linked loans worth HKD$6.85B (approx. US$882M) in alignment with its commitment to sustainability.

Before this announcement, Hongkong Land, one of Asia’s leading real estate group that manages more than 850,000 square metres of property across Hong Kong, Singapore, Beijing, and Jakarta, had signed its first sustainability-linked loan of HKD$1B (approx. US$128M) with Singaporean bank DBS back in August of last year.

Since November 2020, the total amount that the property group has invested in sustainability is HK$6.85 billion including two four-year loan facilities with DBS worth HKD$1.5 billion (approx.US$193M) and Japanese bank MUFG worth HKD$900 million (approx.US$115M).

Other loans include the three five-year loan facilities with Hong Kong-based bank BOCHK worth HKD$2.7 billion (approx.US$347M), British multinational bank HSBC worth HKD$1billion (approx.US$128M), and Singapore-headquartered OCBC Bank worth HKD$750 million(approx.US$96M). 

According to the Loan Syndications and Trading Association (LSTA), sustainability linked loans are “any types of loan instruments and/or contingent facilities (such as bonding lines, guarantee lines or letters of credit) which incentivise the borrower’s achievement of ambitious, predetermined sustainability performance objectives. The borrower’s sustainability performance is measured using sustainability performance targets (SPTs), which include key performance indicators, external ratings and/or equivalent metrics and which measure improvements in the borrower’s sustainability profile.”

In a press release seen by Green Queen, chief executive of Hongkong Land, Robert Wong, said, “These sustainability-linked loans further demonstrate the integration of sustainability in all aspects of our business, and our desire to continue to support the development of sustainable capital markets in the region.”

If the group achieves its agreed-upon ESG (Environmental, social and governance) targets with the banks, it stands a chance to gain a tiered discount on the interest rate of the loans. These targets range from reducing greenhouse gas emissions to tackling food waste to use of solar as well as continuous management of its green building certifications in the Central Business District of Hong Kong.

These sustainability-linked loans further demonstrate the integration of sustainability in all aspects of our business, and our desire to continue to support the development of sustainable capital markets in the region

Robert Wong, chief executive of Hongkong Land

Deputy chief executive of BOCHK, Wang Bing, said that sustainability is a key focus under the bank’s core strategic goals. “As environment, social and governance are integrated to the Bank’s policies, we encourage and support corporate customers to establish sustainable business models, by providing them with diversified sustainable financial services including deposits, loans, bonds, as well as acting as adviser.”

The proceeds of the loans will be incorporated into the general working capital and for corporate funding as well as will be vital in funding ongoing green building projects.

“MUFG is an active and leading market participant in ESG-linked financing and is committed to supporting our clients in making a difference.  We are proud to be a close partner of Hongkong Land in its sustainability journey, contributing to the ongoing development of greener capital markets in the region,” said Tony Lee, Managing Director and Head of Global Corporate Banking, East Asia of MUFG Bank.

We support corporate customers to establish sustainable business models, by providing them with diversified sustainable financial services including deposits, loans, bonds, as well as acting as adviser

Wang Bing, deputy chief executive of BOCHK

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Tan Wing Ming, Regional General Manager for North East Asia of OCBC Bank, concluded that over the last few years, sustainability has been the focus for many customers with green finance becoming a crucial part of its sustainability strategy. “The commitment from our long-time customer Hongkong Land – which has multiple sustainable financing transactions under its belt – is proof of that.  We are pleased to provide them with our support as we continue towards our goal of building a S$25 billion sustainable finance portfolio by 2025.”

Elsewhere, investment banking giant Goldman Sachs pledged to become carbon neutral by the end of the decade, with chairman and CEO David Solomon emphasizing that the demand for sustainable finance has never been larger and shows “no signs of slowing down”, with the bank investing US$750 billion into its climate transition last year.

Swiss fashion behemoth H&M Group issued a €500 million (US$606 million) sustainability-linked bond (SLB) which is different from a green bond as this one is linked with firms achieving their sustainability goals. Subsequently, the bond was 7.6-times oversubscribed attracting over US$4.6 billion orders.

Back in June of last year, the manager of Link REIT, Link Asset Management received a five-year sustainability-linked loan of HKD$1 billion (US$129 million) from OBC Bank, pointing towards the real estate investment trust’s plan to green its operations. 

Lead image courtesy of Hongkong Land.