Green loans catching on with Asian developers

Borrowers seeking more channels for sustainability-linked financing

SYDNEY • Asian property developers are delving deeper into green loans, as shown by a recent deal tied to a premium office tower in a Singapore park.

Frasers Property raised a $1.2 billion green loan, the first of its kind by a South-east Asian borrower under principles set by the Asia Pacific Loan Market Association (APLMA) in March that aim to standardise disclosure. The facility refinances existing loans tied to Frasers Tower, an energy-efficient office with its own park and podium roof gardens.

Green and sustainability-linked loans are playing catch-up to bond markets, as borrowers demand more channels for such financing amid a push to address pollution and congestion created by rapid urbanisation.

While critics of green finance have pointed to a lack of universal standards, measures like the APLMA's guidelines aim to increase transparency on the use of proceeds and on the environmental impact of projects.

"There are strong returns for banks to get into sectors like green buildings and renewable energy as they are showing very strong financial performance," said Mr Jonathan Drew, managing director, Infrastructure and Real Estate Group, Global Banking Asia-Pacific at HSBC.

Property player Ho Bee Land last month signed a £200 million (S$358 million) green bridge loan for the acquisition of the Ropemaker Place commercial building in London.

STRONG RETURNS

There are strong returns for banks to get into sectors like green buildings and renewable energy as they are showing very strong financial performance.

MR JONATHAN DREW, managing director, Infrastructure and Real Estate Group, Global Banking Asia-Pacific at HSBC.

Hong Kong real estate firm New World Development in March raised a HK$3.6 billion (S$629 million) maiden green loan for a commercial redevelopment project.

"In Hong Kong, we increasingly see property firms that are developing green buildings based on the expectations of tenants, financiers and the community to develop projects that provide higher level of energy efficiency," said Mr Drew, one of the lenders for the New World transaction and the green structuring adviser for the Ho Bee Land deal.

Asian borrowers outside of real estate have also been adopting green and sustainability-linked loans.

Hong Kong's Leo Paper Group this month signed a HK$350 million loan for environmental projects in China. Wilmar International this year has raised two separate credit facilities where the interest rate will be reduced based on sustainability targets achieved.

Sydney-based Macquarie Group in June raised a £2 billion loan, with tranches to financing renewable energy-efficient projects and buildings.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 25, 2018, with the headline 'Green loans catching on with Asian developers'. Print Edition | Subscribe