CDL issues the first green bond by a Singapore company
City Developments Limited (CDL), through its wholly-owned subsidiary CDL Properties Ltd (CDLP), has successfully launched the first green bond by a Singapore company. The two-year senior secured green bond has raised S$100 million at 1.98% fixed rate due 2019. The investors comprised mainly financial institutions and fund managers. The green bond is issued under the CDLP S$700 million secured Medium Term Note (MTN) Programme first established in 2001. DBS Bank Ltd. (DBS) is the sole bookrunner on this transaction.
Moody’s Investors Service expects global green bond issuance will reach another record in 2017, and could even rise to US$206 billion, following an increase of 120% to US$93.4 billion in 20161 .
The demand for green bonds is fuelled by the Paris Climate Change Agreement, which took effect on 4 November 2016. Singapore has since ratified the Paris Agreement, and pledged to reduce its carbon emissions intensity by 36% from 2005 levels by 2030 as well as stabilise its emissions with the aim of peaking around 2030. More investors are seeking to fund low-carbon and climate-resilient projects that are aligned with the goal of limiting global warming to below two degrees Celsius. Furthermore, the number of signatories to the United Nations-supported Principles for Responsible Investment has increased about 16 times from 100 in April 2006 to more than 1,600.
Increasingly, the Singapore Government is taking steps to match the demand for sustainable investments. Green bonds are among a wider range of sustainability-oriented benchmarks, funds and products that the Monetary Authority of Singapore is seeking to promote locally.
As one of Singapore’s largest commercial landlords, the success of CDL’s inaugural green bond issuance paves the way for other Singapore firms to tap into the fast-growing green bond market to finance green building projects and sustainability initiatives.
Proceeds of CDL’s first green bond will be allocated to the repayment of a S$100 million loan extended by CDL to CDLP which owns Republic Plaza. Completed in 1996, Republic Plaza, one of Singapore’s tallest skyscrapers, is a premium Grade A office building in the heart of Singapore’s Central Business District, directly connected to the Raffles Place Mass Rapid Transit (MRT) station. Since its completion, Republic Plaza has continuously been upgraded, including the major retrofitting of chiller plants and installation of energy efficient lightings with motion sensors, to improve the building’s energy efficiency. In 2012, Republic Plaza was awarded by Building and Construction Authority (BCA) with the highest Green Mark Platinum rating.
As a result of continuous efforts to enhance energy and water efficiency, Republic Plaza saves more than six million kilowatt-hour of energy annually, equivalent to the annual energy consumption of about 1,200 three-bedroom apartment units of around 100 square metres each. It also saves approximately 10,255 cubic metres of water, equivalent to approximately four Olympic-sized swimming pools. In total, this translates into more than S$1.2 million of savings from annual energy and water consumption.
Mr Sherman Kwek, CDL Deputy Chief Executive Officer said, “Green finance offers us an alternative financing stream. There is an increased interest in socially responsible investments and a growing demand for relevant products. CDL’s inaugural green bond, also the first by a Singapore company, links our sustainability initiatives with the capital markets and enables us to tap on investors who are supportive of the commitment that CDL has made over the past two decades towards sustainability best practices.”
“CDL’s green bond issuance also complements the Singapore Government’s target of greening at least 80% of the country’s building stock by 2030, which could potentially be the lynchpin of Singapore’s climate pledge to reduce its Greenhouse Gas (GHG) emissions. It is clear that for the next 13 years, real estate companies have a large role to play in mitigating climate change and contributing towards Singapore’s greening and GHG emissions reduction goals. We would certainly be keen to explore more green bond issuances in future.”
The green bond was prepared in alignment with the Green Bond Principles, a set of voluntary guidelines encouraging transparency and disclosure of a bond’s use of proceeds; project evaluation and selection criteria; management of proceeds; and ongoing impact reporting commitments.
Sustainalytics, a leading global provider of Environmental, Social and Governance (ESG) and corporate governance ratings and research, provided a second party opinion on the robustness of the green bond framework and its environmental credentials. The firm states in its assessment that CDL has a strong overall environmental commitment and is well positioned to issue green bonds. Given the alignment of the bond with the ICMA Green Bond Principles 2015, Sustainalytics considers the CDL green bond to be robust and credible. In addition, Sustainalytics has independently rated CDL as an industry leader in ESG performance.
Climate Bonds Certification of this green issuance has been verified by KPMG using the Climate Bonds Standard developed by the Climate Bonds Initiative (CBI). CBI is the only organisation in the world working solely to mobilise the largest capital market – the US$100 trillion bond market, for climate change solutions.
Mr Sean Kidney, CEO of CBI said, “This Climate Bonds Certified issuance is another tangible reflection of CDL’s leadership in the property sector, already demonstrated by its long-term environmental objectives and commitment to sustainability. There is enormous potential to improve the emissions and energy performance of commercial property within major urban centres. The Republic Plaza Green Bond by the CDL Group will garner well-deserved attention from within Singapore and wider Asian and Australian property markets for its best practice and innovation in green finance.”
Mr Clifford Lee, Head of Fixed Income, DBS said, “We are very pleased to partner CDL to successfully bring Singapore’s first SGD corporate green bond to the market. With this inaugural issue, it will kickstart the development of a green bond market in Singapore, further adding to the breadth and depth of Singapore’s debt market. More importantly, it will augment efforts by the financial industry towards responsible financing.”