Charter Hall funds $500 million sustainability-linked loan

22 November 2021

Charter Hall Group has funded a $500 million sustainability-linked loan for the Charter Hall Office Trust.

The loan was syndicated by MUFG Bank (MUFG) and Sumitomo Mitsui Banking Corporation (SMBC) with MUFG acting as ESG Structuring Coordinator. It directly links the Fund’s financing costs to its performance as it relates to Environmental, Social and Governance (ESG) objectives.

This transaction is part of Charter Hall’s new Green Financing Framework and brings the Group’s sustainable finance deals to over $700 million in total. The transaction marks the largest sustainability-linked loan secured by Charter Hall to date.

Charter Hall Office CEO, Carmel Hourigan, said, “This transaction further demonstrates our commitment to embedding ESG objectives into every aspect of our business. This is an outstanding outcome for CHOT and reflects investor demand for high quality assets that deliver environmental and social value, alongside financial outcomes to our funds and broader business.”

MUFG Bank Oceania’s Head of Global Corporate and Investment Banking, Drew Riethmuller, said, “MUFG is committed to helping our clients on their ESG and decarbonisation journeys and we have a target to arrange JPY35 trillion (approximately AUD 400 billion) in sustainable finance globally by 2030. We are particularly proud to have worked with Charter Hall on this landmark transaction and furthering the development of the Australian Sustainability Linked Loan market by providing an increasing array of sustainable finance investment opportunities for debt providers.”

SMBC Head of Corporate Banking Asia Pacific, Rajeev Kannan, said “SMBC is very pleased to be supporting Charter Hall with its environmental and sustainability objectives. SMBC is committed to financing the carbon transition with JPY30 Trillion (approximately AUD 360 Billion) of green financing to be executed between 2020 and 2029. Even as SMBC Group’s operations will be carbon neutral by 2030, we are working with key customers to also make our loan and investment portfolio carbon neutral by 2050. “

The seven-year, $500 million facility is directly linked to the Fund’s performance against sustainability performance targets and internationally recognised independent sustainability reporting standards, delivering a financial benefit to the Fund should it meet or exceed the key performance indicators (KPIs) laid out in the loan agreement.

A second party opinion has been provided by Sustainalytics, who considered the Key Performance Indicators (KPIs) to be material and sufficiently in scope of the five core components of the Sustainability Linked Loan Principles 2021. These are aligned with the CHOT fund strategy and targets will be measured against the National Australian Built Environment Rating System (NABERS) and Green Star Rating tools, which are administered by the NSW Department of Planning, Industry and Environment and Green Building Council of Australia respectively.

CHOT has reduced its carbon intensity (kg/sqm) by 23.5% since FY19 and remains focused on the continued integration of ESG into its fund strategy and operational performance. CHOT’s reduction in carbon intensity is aligned with the Group’s platform-wide approach to sustainability. Charter Hall has committed to achieving net zero emissions in operations across its business by 2030.