April 18, 2019 / 8:39 AM / 8 months ago

Frasers Property boosts Green credentials

* Loans: Borrower wraps up third Green financing

By Prakash Chakravarti and Chien Mi Wong

Hong Kong, April 18 (LPC) - Frasers Property boosted its environmental credentials with a A$600m (US$429m) five-year Green loan, the Singaporean company’s third since its debut late last year and the first Aussie dollar-denominated Green deal.

The loan, which targets energy-efficient projects under the developer’s Green Loan Framework, falls under the Green Loan Principles (GLP) established in March 2018 by the Loan Market Association and Asia-Pacific Loan Market Association to create consistency across the Green loan market.

Frasers Property was the first Singaporean company to raise a Green loan when it closed a S$1.2bn (then US$880m) five-year deal in September 2018. The facility was also the first syndicated secured Green loan from South-East Asia under the GLP.

In addition to Frasers Property, Asian borrowers ranging from airports to railroads and commodity trading firms to real estate companies have tapped the Green loan market.

The property sector, however, is showing a growing preference for the format.

“Green loans will be a big theme in 2019,” said Andrew Ashman, Barclays head of APAC loan syndicate. “There is significant interest from both borrowers and lenders for the product. The real estate sector is a natural fit for the Green Loan product given the industry’s focus on energy efficiency.”

Barclays was the sole Green coordinator on Fraser Property’s A$600m Green loan, which attracted 12 banks in general syndication, including Chinese and Taiwanese lenders.

Green lending is expected to grow further as additional protocols are introduced. Last month, the APLMA, LMA and Loan Syndications and Trading Association launched another framework which is tied to borrowers’ sustainability performance.

The Sustainability Linked Loan Principles (SLLP) were developed with financial institutions active in issuing loans where interest margins are tied to certain sustainability targets.

“Unlike Green loans, SLLPs don’t require the loan proceeds to finance Green projects. However, SLLPs encourage borrowers to become holistically ‘greener’ by measuring and reporting sustainability linked targets on an ongoing basis. These loans will usually offer a reduction in margin if certain pre-defined sustainability targets are met,” Ashman said.

There is currently no regulatory requirement to lend to Green financings and no incremental pool of liquidity among lenders earmarked for Green loans, in contrast to the investor base for Green bonds. As more banks set their own sustainability targets, however, demand is expected to increase.

“The development of this market could accelerate if lenders were offered capital relief or funding cost benefits on their Green Lending activities,” he said.

Reporting By Prakash Chakravarti and Chien Mi Wong; Editing by Tessa Walsh and David Holland

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