Singapore lender DBS provided sustainability-linked loan facilities for the first time to SK Telecom (SKT) of South Korea and Keppel Land of Singapore, incorporating interest rate reductions pegged to environmental, social and governance (ESG) targets.
The facility for SK Telecom, announced on June 2, amounted to 200 billion won (US$180 million) for three years and features interest rate discounts pegged to pre-determined ESG targets in areas such as carbon emissions management and workplace health and safety metrics. In the event SKT meets or exceeds the pre-determined ESG targets, the corresponding interest rate will be reduced. The loan will be used to create social value through diverse corporate activities such as the expansion of environmentally-friendly network infrastructure.
SKT chief financial officer Yoon Poong-young says the company has extended its ESG management to its financing strategy and will do its best to create a virtuous cycle where pro-active ESG-related efforts are translated into greater enterprise value.
The company has been focusing on creating social value through aggressive efforts to reduce greenhouse gas emissions and build a stronger social safety net by fully utilizing its advanced information and communications technology.
In another deal, Keppel Land has secured its maiden sustainability-linked loan from DBS amounting to S$150 million (US$113.64 million) for five years, referencing on the Singapore overnight rate average (Sora), the first such loan for Keppel Land.
Announced on June 1, the facility’s interest rate comprises two components: a compounded daily Sora rate calculated in arrears, and an applicable margin. The loan also incorporates interest rate reductions linked to pre-determined ESG targets, allowing Keppel Land to enjoy savings in borrowing costs as it achieves these ESG targets. These include Keppel Land achieving a five-star rating in the 2021 Global Real Estate Sustainability Benchmark (GRESB) Real Estate Assessment.
The proceeds from the loan will be used for general corporate purposes, including but not limited to refinancing of maturing debt, capital expenditure for new development projects, and/or potential land and property acquisitions.
Commenting on the facility, Keppel Land CFO Tan Boon Ping says Keppel Land, in line with its Vision 2030, places sustainability at the core of the company strategy. “This goes beyond the development and management of low-carbon, resource-efficient buildings, but also extends to the strengthening of our green funding sources,” she adds.
This sustainability-linked loan with DBS follows Keppel Land’s first green loan facility of 850 million yuan (US$133.20 million), secured in 2019, for the development of Seasons City (Phase 1) in the Sino-Singapore Tianjin Eco-City in China.
To increase its support for businesses seeking to achieve their sustainability ambitions, DBS has committed to finance S$50 billion in renewable, clean-energy and green projects by 2024, more than doubling its earlier target of S$20 billion. DBS is the first Singapore bank to offer transition financing and launched the world’s first sustainable and transition finance framework and taxonomy to help clients advance their sustainability agenda.
The bank has also recently committed to ensure net zero operational carbon emissions across its operations by 2022 and continues to reduce its carbon footprint while advancing its sustainable procurement agenda.