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SAIC Finance launches first green retail auto ABS in China
Underlying pool consists of auto loans originated for new energy vehicles
10 Jun 2021 | The Asset

MUFG Bank (MUFG) announced on June 9 that its wholly-owned subsidiary, MUFG Bank (China), has partnered with Shanghai Automotive Group Finance Company (SAIC Finance) to launch a 910 million yuan (US$142.60 million) green retail auto loan asset-backed securities (ABS), a first for China. MUFG served as the financial adviser and underwriter for this transaction.

The facility consists of new auto loans originated by SAIC Finance for “new energy vehicles” (NEVs), making it not just China’s first ABS focused on the automobile sector, but an important milestone in support of the country’s climate change agenda. The issuance generated healthy interest from a wide range of investors and was oversubscribed three times upon book closure.

This transaction has also been certified as a green issuance. According to its green certification report, the NEVs financed by this transaction will potentially help eliminate 13,000 tonnes of coal consumption per year, thereby reducing emissions of CO2 by 11,300 tonnes and other pollutants such as nitrogen oxide (NOX) by 34 tonnes.

This deal likewise represents MUFG’s latest effort towards aligning its strategic commitment to addressing climate change with the sustainability aspirations of its clients. For this particular transaction, MUFG provided expertise and insights of the onshore and offshore green bond markets as well as the latest regulatory requirements to guide the client along throughout the issuance process.

Commenting on the transaction, MUFG Bank (China) deputy president and head of its China business division Johnson Yuan says: “With this issuance, SAIC has made a very strong statement about its commitment towards leading the auto sector towards a more sustainable future.”

MUFG’s head of ESG finance for Asia-Pacific Colin Chen describes the successful launch of China’s first green ABS as an important milestone for the country’s fast-developing green bond market. “The positive response for SAIC’s debut green issuance gives us confidence that investor interest in such assets will only grow,” he adds.

MUFG has publicly committed to investing 20 trillion yen (US$182.65 billion) into sustainability-related financing globally by 2030. Already well ahead of schedule, with 19% of this target being achieved in its first year in 2019, MUFG recently announced that it has raised this target to 35 trillion yen. In May, MUFG also announced its commitment to achieve net-zero emissions in its finance portfolio by 2050 and its own operations by 2030.

As part of proactive efforts to support environmental conservation in China, MUFG China established a 5 billion yuan green credit fund in July 2020 to finance the environmental projects of onshore clients.

SAIC Finance is a non-bank financial institution with a network of auto dealers across 300 cities in China. Established in 1994, it is majority-owned by SAIC Motor Company, the country’s leading state-owned automobile manufacturer.

Apart from providing auto loans to retail customers, SAIC Finance has also been providing funding to group companies, especially in the areas of R&D and manufacturing for NEVs, an up-and-coming segment within the Chinese auto market that accounted for 25% of total local automobile sales in 2020.