Sembcorp Industries has just launched a $675 million sustainability-linked bond (SLB).
The ten-and-a-half year Singapore dollar bonds were issued at a coupon rate of 2.66% under the group’s $3 billion Multicurrency Debt Issuance Programme. DBS and UOB are the joint lead managers and bookrunners for the bond.
Sembcorp priced its SLB through its wholly-owned subsidiary Sembcorp Financial Services. This was anchored by an investment of $150 million from the International Finance Corporation (IFC), the private sector investment arm of the World Bank.
This marks the IFC’s first global investment in an SLB.
Unlike traditional green bonds, SLBs require issuers to pledge performance improvements against tailor-made environmental, social and governance (ESG) targets.
The interest rate of the SLB will be stepped up by 0.25% from the first interest payment date on or after April 1, 2026 if the stated sustainability performance targets of greenhouse gas emissions intensity is not achieved by Dec 31, 2025.
The target is to have a reduction to 0.4 tonnes of carbon dioxide equivalent per megawatt hour or lower.
Net proceeds from the SLB will be used for the purposes of: financing the general corporate working capital requirements of Sembcorp and its subsidiaries, refinancing the group’s existing debt and/or financing or refinancing of its renewable energy initiatives, or potentially, other sustainable projects.
Sembcorp has more than 3.3 gigawatts (GW) of renewable energy capacity comprising solar, wind and energy storage solutions in key markets such as Singapore, China, India, UK and Vietnam.
It is looking to quadruple its installed renewable energy capacity to 10GW by 2025 from 2.6GW in 2020.
Wong Kim Yin, CEO and group president of Sembcorp stresses that the company is fully committed to greening its portfolio and is thus heartened that the IFC chose to invest in its issuance.
“Their support validates our strategy and spurs us on in our drive toward supporting the global energy transition and a low-carbon economy,” he added in a regulatory filing on Sep 29.
“With the success of this bond issuance, investors have made their position on the climate crisis very clear and are continuing to shift capital to align their portfolios with net-zero targets,” chimes Alfonso Garcia Mora, APAC vice president at the IFC.
The IFC considers sustainable growth, decarbonisation and energy security as key themes in both developed and emerging markets.
Its investment in Sembcorp's SLB is in line with te World Bank Group's Climate Change Action Plan between 2021 to 2025.
Under the plan, the IFC has committed to align all new real sector operations with the objectives of the Paris Agreement by July 1, 2025 and aims to reach 35 per cent financing for climate on average over the next five years.
Sembcorp shares closed at $1.89, up 5 cents or 2.7% on Sep 29.
Cover image: Sembcorp Industries
