Continuing its push for adopting sustainable practices, Hong Kong-based real estate developer New World Development (NWD) issued a 10-year US$200 million sustainability-linked bond (SLB) with a coupon rate of 3.75%. The bond is aligned to NWD’s “Renewable Energy Roadmap” that aims to achieve 100% renewable energy for NWD’s Greater Bay Area rental properties by the end of 2025/26.
Should NWD fail to achieve its future target, the company will purchase carbon offsets at an equivalent amount of 25bp per annum from 2027 until the SLB matures in 2031. The targets set out by NWD will be reviewed by Sustainalytics to ensure that they are met.
“Businesses must take timely action to combat climate change. NWD will contribute to a cleaner future for the next generations as we expand in the Greater Bay Area (GBA) of China. We are excited to announce the world’s first USD sustainability-linked bond by a real estate developer and our target to achieve 100% renewable energy for GBA rental properties. We look forward to more real estate players taking bold but necessary steps to create shared value with all stakeholders and protect the environment,” says Adrian Cheng, executive vice-chairmen and chief executive officer of NWD.
The bond experienced strong demand from investors with the orderbook being six times oversubscribed at its peak and included asset and fund managers (76%), insurance companies (13%), private banks (9%) and banks/others (2%). Around 79% of the bond was allocated to ESG (environmental, social and governance) investors.
J.P. Morgan and UBS acted as joint global coordinators, joint bookrunners and joint structuring agents for the deal.
“Business-as-usual carbon reduction is no longer enough to address climate risks. In addition to the green targets set out in New World Sustainability Vision 2030, we will align to global best practices by adopting renewable energy in our building operations and protecting our communities from climate change impacts. This transaction reinforces NWD’s leadership in ESG integration and sustainable finance and supports renewable energy market development,” says Ellie Tang, head of sustainability of NWD.
The NWD deal represents the latest development in the growing trend of sustainability-linked financing in the Asia-Pacific region with a variety of industry players examining how they can integrate financial incentives to achieve ESG goals.
Majority of these activities have been in the area of sustainability-linked loans with the likes of Downer Group in Australia completing an A$1.4 billion (US$1.09 billion) sustainability-linked term and revolving credit facilities that could see borrowing costs reduced if the company delivers on its commitments to sustainability. Some noteworthy sustainability-linked financing over the years have included those done by Hong Kong’s COFCO International and Langham Hospitality Investments and Singapore’s Chew’s Agriculture.
Despite the pandemic, the sustainability bond market has remained resilient with Moody’s Investors Service predicting that sustainability bond issuance could approach US$425 billion in 2020 from the recorded US$323 billion in 2019.