City Developments Limited (CDL) has become the first corporate to obtain the OCBC 1.5°C loan, with interest rate incentives pegged to annual decarbonisation performance targets.
CDL’s three-year GBP200 million ($338.2 million) sustainability-linked revolving credit facility (RCF) will be used for refinancing, general corporate funding and working capital purposes, according to a Dec 4 announcement.
Launched in March, the 1.5°C loan provided by OCBC incentivises corporates to set and work towards clear carbon emissions reduction targets aligned with internationally recognised, science-based net-zero decarbonisation pathways for their sectors.
When annual targets are met or exceeded, corporates will receive a reduced interest rate on their loans. The reference pathways, developed by global organisations, are geared towards achieving a net zero level of greenhouse gas emissions by 2050 to limit global warming to 1.5°C above pre-industrial levels.
As part of the loan terms, CDL will enjoy interest rate reductions upon meeting the pre-agreed annual decarbonisation performance targets, in line with CDL’s targets that are validated by the Science Based Targets initiative (SBTi).
CDL has committed to achieving operational net zero by 2030 for its new and existing wholly-owned assets and developments under its direct operational and management control, with its entire portfolio achieving operational net zero by 2050.
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CDL aims to reduce emissions intensity by 63% per square metre leased area for Scope 1 and 2, and 41% per square metre gross floor area for Scope 3 emissions from purchased goods and services.
CDL also targets to cut by 58.8% its Scope 3 emissions from investments, such as hotels managed by CDL’s wholly-owned hotel subsidiary, Millennium & Copthorne Hotels Limited.
The real estate company aims to achieve these targets by 2030 against a 2016 baseline. According to CDL, the performance measurements will be externally assured.
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In 2022, CDL achieved a 24% reduction in carbon emissions intensity against its baseline year. It achieved a 10% reduction in total operational carbon emissions across all its business operations in Singapore compared to 2021, as well as a 22% reduction in embodied carbon of building materials compared to the conventional equivalents.
Yiong Yim Ming, group chief financial officer at CDL, says the “first-of-its-kind” sustainability-linked loan “directly incentivises” decarbonisation performance. “Since 2017, we have embarked on alternative financing avenues to channel capital towards building smarter, greener and more climate-friendly infrastructure. With rising investor expectations and a global shift to a low-carbon economy, we will continue to explore more sustainable financing initiatives aimed at developing green buildings that enhance our emissions pathways to reach our decarbonisation targets.”
With this loan, CDL has secured around $6 billion of sustainable financing in the form of a green bond, various green loans and sustainability-linked loans to date, starting with its launch of the first green bond by a Singapore company in 2017.
Companies should adopt global standards that really provide a very clear target, and also a pathway, to achieve net zero, says Esther An, chief sustainability officer at CDL.
Speaking on a Dec 3 panel at a COP28 Singapore Pavilion alongside DBS and OCBC leaders, An says the announcement is a signal that achieving SBTi validation is “doable”. “This is very aspirational, you know, the SBTi target is very ambitious. The whole idea is to make it so hard, to whip you from behind, to work harder to scout for solutions, scout for technology, and with financing, it helps.”
Elaine Lam, head of global corporate banking at OCBC, notes that CDL has been ranked by Corporate Knights as the world’s most sustainable real estate management and development company and Singapore’s most sustainable company. “We look forward to supporting CDL and gaining more insights into their transition strategies and progress on their targets going forward.”
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Lam adds: “As the low-carbon race intensifies and more companies chart out their net-zero journeys, we stand ready to support their decarbonisation ambitions. After all, the only viable way for us to reach net zero in our financed emissions is for our clients to reach net zero in their emissions.”
OCBC says insights gained from working with corporates that take up its 1.5°C loan will help the bank “better support” their transition plans with suitable advisory and financing solutions.
OCBC’s sustainable finance portfolio hit $52 billion at the end of September, surpassing the bank’s $50 billion target more than two years ahead of schedule.
The latest figure, revealed by group chief executive officer Helen Wong on Dec 3, is up some $8 billion year to date. Southeast Asia’s second-largest financial services group by assets reported that its sustainable finance portfolio amounted to $44 billion at the end of 2022, which was up 29.4% y-o-y from $34 billion reported at end-2021.
OCBC set the $50 billion target in 2021 after surpassing its original targets of $10 billion by 2022 and $25 billion by 2025 ahead of time.
As at 11.17am, shares in CDL are trading 2 cents higher, or 0.32% up, at $6.20; while shares in OCBC are trading 7 cents higher, or 0.55% up, $12.71.
Photos: COP28 Singapore Pavilion
