As part of its ongoing commitment to ESG integration, New World Development Company Limited (“NWD” or the “Company”) has become the first real estate developer in the world to price a USD Sustainability-Linked Bond (SLB). The SLB was oversubscribed by 6 times at its peak, with strong participation from international ESG investors (~80%) including renowned fund managers, asset managers and insurance companies across Asia and Europe. This deal was priced at T+275 basis points, implying negative 5 basis points new issue premium, and it also achieved the lowest yield yet for a public USD-denominated bond offering by NWD.
The 10-year USD $200 million bond (coupon rate: 3.75%) has a Sustainability Performance Target that is aligned to the Company’s latest Renewable Energy Roadmap, which commits to achieving 100% Renewable Energy [1] for NWD’s Greater Bay Area rental properties [2] by Financial Year (FY) end 2025/26. The performance against the target, which will be reviewed by a third-party assurance provider, will be reported in NWD’s Annual Report until the SLB matures in 2031. Should NWD fail to achieve the target, it will purchase carbon offsets in an equivalent amount to 25 basis points per annum from 2027 until the SLB matures. The proceeds of the SLB will be allocated to NWD’s long-term sustainability initiatives, as well as general corporate purposes.
Adrian Cheng, Executive Vice-Chairman and Chief Executive Officer of NWD, said, “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.”
Echoing the commitment of New World Sustainability Vision 2030 to reduce 50% carbon emissions intensity across diversified businesses, the “Renewable Energy Roadmap” and the SLB's target will further reduce Scope 2 emissions (indirect greenhouse gas emissions from energy consumption) in NWD’s rental properties. These commitments will help the Company decarbonize at the science-based target level, under the Paris Climate Agreement’s 1.5°C scenario. NWD will increase its renewable energy uptake via onsite generation, power-purchase agreements and renewable energy certificates.
Ellie Tang, Head of Sustainability of NWD, added, "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.”
NWD has created a Sustainability-Linked Bond Framework, which references the Sustainability-Linked Bond Principles issued by the International Capital Market Association (ICMA). The Company has also received a positive Second Party Opinion from Sustainalytics, the leading independent global provider of ESG and corporate governance research and ratings to investors. Only a handful of companies have so far issued Sustainability-Linked Bonds anywhere in the world.
NWD has maintained a 5-star (highest) rating on the Global Real Estate Sustainability Benchmark (GRESB) in 2019 and 2020 and has been a leading innovator in sustainable finance. Dedicated to promoting green buildings in the GBA, the Company issued Hong Kong’s first green loan and a green bond via its wholly owned subsidiary New World China Land in 2018. In 2019, NWD secured a HKD1 billion sustainability-linked loan and, in 2020, executed Hong Kong’s first interest rate swap linked to the United Nations Sustainable Development Goals.
The banks involved in this transaction were J.P. Morgan and UBS, as Joint Global Coordinators, Joint Bookrunners and Joint Structuring Agents.
More information here
[1] “Renewable energy” refers to onsite installation and offsite renewable energy procurement
[2] Rental properties with direct operational control only
