City Developments (CDL) C09 announced on June 25 that it has secured a $400 million sustainability-linked loan (SLL) from DBS Bank D05 , with nature conservation targets aligned with the Taskforce on Nature-related Financial Disclosures’ (TNFD) recommendations.
CDL says the proceeds will be used for general corporate funding and working capital purposes, including redeveloping CDL’s existing assets.
The SLL is marketed as the first of its kind globally as it incorporates specific performance targets related to “biodiversity conservation, waste management and water efficiency”.
CDL tells The Edge Singapore that the loan has a five-year term, and all sustainability performance targets (SPTs) are assessed annually at the end of each financial year.
On DBS’s website, the bank defines SLLs as loans structured to “enable customers to pay variable interest” depending on their achievement of pre-agreed ESG performance targets, validated by an independent ESG rating agency or verification party.
If CDL achieves certain SPTs by a pre-agreed deadline, the developer should enjoy lower interest on its loan.
See also: TNFD framework launch floats nature-related risks to corporates' attention
Unlike green loans, which restrict borrowers to using proceeds for a particular green project, SLLs are agnostic. This is why CDL can use the proceeds for its own purposes.
CDL and DBS have partnered on similar instruments in the past. In 2017, DBS supported CDL to launch the first green bond by a Singapore company. In 2019, CDL pioneered its first SLL with DBS.
In December 2023, CDL also became the first corporation to obtain the OCBC 1.5°C loan, a three-year GBP200 million ($344 million) sustainability-linked revolving credit facility from Oversea-Chinese Banking Corporation (OCBC) O39 , with interest rate incentives pegged to annual decarbonisation performance targets. CDL has secured over $8 billion in sustainable financing since 2017.
See also: CDL, UOB among 320 organisations that pledge to make nature-related disclosures by FY2025
SLLs are still relatively new here. The Monetary Authority of Singapore (MAS) launched in November 2020 the Green and Sustainability-Linked Loan Grant Scheme (GSLS) — touted as a world-first — to encourage corporates to obtain such loans. Effective Jan 1, 2021, the GSLS defrays some of the expenses incurred from engaging independent verifiers.
With the loan type becoming mainstream, the central bank and regulator discontinued one of the scheme’s two tracks at the start of this year. “MAS has seen positive uptake since its inception two years ago and observed that many banks have put in place sustainable lending frameworks, including those targeted at SMEs and individuals,” reads an announcement from June 2023.
However, SLLs here and abroad have largely been focused on measuring energy or water savings. CDL’s focus on biodiversity, especially with targets aligned with TNFD’s recommendations, is novel.
Chew Chong Lim, group head of real estate in DBS’s Institutional Banking Group, says it is “essential” to integrate biodiversity and ecosystem preservation considerations into financial solutions. “This first-of-itskind sustainability-linked loan, aligned with CDL’s TNFD-related targets, demonstrates our commitment to exploring new frontiers in the ESG space and helping to build a future where economic growth and ecological stewardship go hand in hand.”
What is TNFD?
TNFD was established in June 2021 with the support of the G20 and G7 governments. The Taskforce published its corporate reporting recommendations on nature-related issues in September 2023 after a two-year process led by its 40 members and supported by 20 knowledge partners.
The 14 disclosure recommendations guide organisations in reporting and acting on evolving nature-related dependencies, impacts, risks and opportunities. These “drivers of nature change” include climate change, pollution and use of land, freshwater and ocean, among others.
See also: A deeper look into CDL’s borrowings
On June 28, TNFD announced 96 additions to its list of adoptee firms. In total, 416 organisations worldwide have pledged to disclose their material nature-related issues to investors and other stakeholders.
TNFD announced at London Climate Action Week a 30% increase in adopters of their corporate reporting recommendations since January. Of the list, publicly-listed companies represent over US$6 trillion ($8.15 trillion) in market capitalisation, a 50% increase over six months.
In January, TNFD’s last major update named five local firms among its “first cohort” of 320 committed organisations. They are CDL, United Overseas Bank U11 (UOB), Olam Agri, Olam Food Ingredients (OFI) and consultancy firm Oceonomy.
Among the new joiners are financial institutions such as LGIM, Generation Investment Management and MUFG Asset Management, global car maker Volvo, and digital services firm Ricoh.
These firms have signalled their intention to begin adopting the TNFD recommendations and publishing TNFD-aligned disclosures as part of their annual corporate reporting by FY2025.
TNFD also announced an update to its Taskforce members, with CDL replacing the Singapore Exchange S68 (SGX Group). CDL will be represented on the Taskforce by its chief sustainability officer, Esther An.
SGX Group will be stepping down from the Taskforce, having served as a member since September 2021.
An says: “CDL takes pride in being the first Singapore company to voluntarily report according to the TNFD recommendations. TNFD complements CDL’s sustainability reporting framework built up since 2008, anchoring on two pillars: financial value and impact on the environment and people.”
The targets
According to CDL, the SPTs of the latest SLL are “tied to targets on nature and biodiversity conservation, nature- and climate-related advocacy and education, as well as operational targets, such as waste management”.
The scope of the SPTs can cover multiple projects by CDL. “Some of these targets include using only native and/or non-invasive species at our new development sites, conducting biodiversity impact assessments at new developments’ sites in or near sensitive areas, waste intensity reduction targets and others,” CDL’s spokesperson adds.
For operational SPTs, such as waste reduction, CDL says it has set “interim annual targets, derived in agreement with DBS”. “Our interim annual performance will be externally validated by a third-party consultant and reported in the annual CDL Integrated Sustainability Report at the end of each financial year.”
In March, CDL became the first company in Singapore to publish TNFD-aligned disclosures in its sustainability report. “Businesses benefit from considering climate and nature-related risks, enabling them to make informed decisions that contribute to a sustainable future. Investors seeking environmentally responsible companies find insights from having both perspectives valuable, recognising the interconnectedness of climate and nature considerations,” reads CDL’s report.
CDL says it took a “prudent approach” to focus the reporting scope on its Singapore operations. CDL will expand this progressively, starting from business operations that are wholly owned and directly managed by CDL’s headquarters in Singapore. “Moving forward, we are looking into expanding the scope pending further due diligence on the availability of data in other selected locations.”
Some 20 pages of the 229-page document are dedicated to the TNFD report. Among CDL’s nature-related dependencies, impacts, risks and opportunities, the developer acknowledges the “significant air pollution and carbon emissions from the built sector, including transportation services and/or electricity generation”, the impetus for CDL’s 29-year sustainability journey so far.
CDL claims to have embraced ESG integration into its business operations since 1995, when it adopted the “conserving as we construct” ethos. It was Singapore’s first real estate developer and the first real estate conglomerate in Southeast Asia to sign the WorldGBC’s Net Zero Carbon Buildings Commitment in 2021.
Yiong Yim Ming, group chief financial officer of CDL, says robust sustainability reporting can channel capital to “expedite” green building and climate action. “We aim to enhance our triple bottom line through sustainable development, achieve our net-zero ambitions and align finance with sustainability performance through innovative capital management initiatives.”
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