Unlike Green Bond, the utilization of the bond proceeds for Sustainability Linked Bond (“SLB”) is not a determinant in its categorization. Instead of evaluating the uses of proceeds, SLB focuses on the issuer’s sustainability profile. The target of SLB is to encourage issuers to commit to future improvement in sustainability outcomes within a predefined timeline.
The sustainability performance of the issuer is measured by Key Performance Indicators (KPIs) and assessed against predetermined Sustainability Performance Targets (SPTs), it will affect the financial and structural characteristics of the bond. According to Sustainability Linked Bond Principles1, the framework of SLB is composed of 5 major components:
| Case 1： | New World Development Becomes World’s First Real Estate Developer to Price a USD Sustainability Linked BondIn 2021, New World Development has priced a 10 year USD200 million Sustainability Linked Bond (with coupon rate: 3.75%). The SPT aligns with the latest “Renewable Energy Roadmap” launched by New World Development. |
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| Case 2： | Enel Successfully Places its First “General Purpose SDG Linked Bond” on the European Market with a Multi-Tranche Issue of 2.5 billion EurosIn 2019, Enel, the national electrical energy agency in Italy launched a multi-tranche Sustainability Linked Bond with 2.5 billion euros in total. |
Unlike Green Loan, the utilization of the loan proceeds for Sustainability Linked Loan (“SLL”) is not a determinant in its categorization. Instead of evaluating the uses of proceeds, SLL focuses on the borrower’s sustainability profile. The target of SLL is to support environmentally and socially sustainable economic activity and encourage borrower to pursue improvements on sustainable development.
The sustainability performance of the borrower is measured by sustainability performance targets (SPTs) which may include but not limited to energy efficiency, greenhouse gas emissions and sustainable sourcing, it will affect loan terms including the interest rate. According to Sustainability Linked Loan Principles1, the framework of SLL is composed of 4 major components:
| Case 1： | Wheelock’s HK$2 billion Sustainability Linked LoanIn 2019, Wheelock and Company Limited (“Wheelock”) obtained a 5-year, HK$2 billion sustainability linked loan. The proceeds will be used on general corporate operation. |
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| Case 2： | Swire Properties Announces First Sustainability Linked LoanIn 2019, Swire Properties reached an agreement with Crédit Agricole Corporate and Investment Bank (“Crédit Agricole CIB”) to convert an existing five-year revolving credit facility of HK$500 million into a sustainability-linked loan. The interest rate would be indexed against the ESG performance of Swire Properties. Crédit Agricole CIB will reduce the interest rate every year based on 2 criteria:Swire Properties retains its listing on the Dow Jones Sustainability World Index (DJSI World).Swire Properties achieves a target reduction in energy use intensity (“EUI”, measured in units of kWh/m2) each year for its Hong Kong portfolio. |