The Singapore-based Royal Group of Companies has obtained the world’s first Islamic green financing in the hospitality sector totaling S$250 million (US$186.57 million) from Maybank Singapore. The facility, which represents the Royal Group’s first foray into the sustainability finance, is earmarked for the construction of Raffles Sentosa Resort & Spa Singapore and for the upgrading of the existing Sofitel Singapore Sentosa Resort & Spa.
The principles of sustainability are closely aligned with the objectives of Shariah, which promote and enhance sustainable development through the principles of fairness, equality and ethics. These Islamic green-financed hotels will embed Shariah-compliant and sustainability concepts in its building design and operations. With green and socially responsible commitment, Royal Group is aiming to improve its business sustainability, which bodes well for environmental conservation, and enhance operational efficiency, which will bring about long-term financial savings.
Commenting on the financing, Royal Group co-chairman Bobby Hiranandani says: “Being Shariah-compliant is not only going the sustainable route, but also being ethical in our approach in building and managing both properties.”
The main difference between a conventional green loan and a Shariah-compliant green financing is that the latter is structured in accordance with Shariah principles where instead of charging interest (as this is not allowed under Shariah), a bank will charge the client profit in consideration of the financing.
There are additional features of Shariah-compliant financing which benefits the client, such as a fixed ceiling rate feature embedded in the facility structure to provide an element of certainty to client so that they will not pay more than the contracted rate, and a non-compounding of profit/charges in the event of late payment of amounts due.
As Maybank Singapore head of global banking Gregory Seow points out, what stood out in Shariah-compliant financing is that it benefits the customers through its product features as well as grant them access to a wider customer or investor base. For instance, corporates who take up Shariah-compliant green financing may attract a wider or new customer base – domestic and international customers who opt for and support goods and services offered by ethical, sustainable and responsible companies, which are also aligned with Shariah principles.
He says moving forward, Maybank Singapore expects to see a greater convergence between the products and services offered under both the conventional and Islamic banking systems premised on environmental, social and governance criteria.
As part of the Royal Group’s sustainability journey, it is upgrading Sofitel Singapore Sentosa Resort & Spa, a five-star luxury resort hotel with 215 rooms and suites situated atop the cliff above Tanjong Beach, to be assessed for BCA Green Mark Gold certification. And Raffles Sentosa Resort & Spa Singapore, which has planned for 62 exclusive villas across more than 10 hectares of sprawling tropical gardens, is preparing to achieve BCA Green Mark GoldPlus certification when the project is completed at the end of 2022. The resort will be the first villa-only hotel in Singapore.
Maybank Singapore has a strong track record in arranging and participating in sustainability-linked loans and green loans, which total S$4.5 billion to date.