Frasers Property Australia (FPA) and Frasers Property Industrial (FPIL), has secured a A$300 million five-year syndicated sustainability-linked loan (SSL) with an option of further A$25 million.
To incentivise sustainable practices, the SLL builds in a reducing pricing structure with interest cost reduction from the second year onwards if both FPA and FPIA maintain a four-star rating or above in each of their Global Real Estate Sustainability Benchmark (“GRESB”) Development report and GRESB Standing Investments report.
This means Frasers Property in Australia now has 45% of its corporate financing facilities secured in the form of sustainability-linked loans and green loans.
The new loan facility is the fifteenth green or sustainability-linked loan secured by the FPL group and was coordinated by Barclays Bank PLC (as Underwriter) and Barclays Capital Asia Limited (as Mandated Lead Arranger and Bookrunner); Mizuho Bank, Ltd.; and United Overseas Bank Limited (as Mandated Lead Arrangers, Underwriters and Bookrunners).
Anita Hoskins, Chief Financial Officer, Frasers Property Australia says while the benefits for borrowers are more evident, she has observed that lenders are increasingly recognising the importance and opportunity in investing in more sustainable projects and business models.
Mr Loo Choo Leong, Group Chief Financial Officer of Frasers Property, commented, “Becoming a more purpose-driven business is important for Frasers Property. We want to be an enduring and progressive organisation, which incorporates sustainability into every aspect of our business, and financing is no exception. The Clean Energy Finance Corporation’s (“CEFC”) participation in this syndication is an important recognition of the Group’s sustainability credentials in Australia.”
The CEFC was established under the Clean Energy Finance Corporation Act 2012 and invests on behalf of the Australian Government to reduce emissions across the economy. The CEFC has confirmed its participation with A$75 million in the SLL. This will help deploy clean energy technologies in two Australian industrial projects that will reduce embodied carbon, cut operating emissions and deliver zero carbon energy electricity for tenants at no additional cost.
Innovative distributed energy generation models will be installed at Rubix Connect Estate in Victoria and The Horsley Park Estate in New South Wales to deliver carbon neutral electricity through onsite solar, battery storage and a biodiesel generator. Frasers Property energy retailer Real Utilities will provide Climate Active certified carbon neutral electricity to the properties’ common areas and its tenants.
Mr Ian Learmonth, CEFC CEO, said, “Frasers Property and Real Utilities’ carbon neutral distributed energy solution unlocks the value of on-site solar, batteries, biodiesel and metering technologies, allowing them to take a long term, strategic and active role in the management of their tenants’ energy needs. This new model has the potential to revolutionise energy use in industrial property.”
Real Utilities, which is part of FPA, is a licensed Australian energy retailer that owns and manages energy infrastructure within some of FPA’s and FPIA’s communities providing carbon neutral energy to all customers at no additional cost. This is the first SLL issued under the Sustainable Finance Framework that was set up by FPA and FPIA in January 2020 (“the Framework”) (Link). In pioneering innovation within the sustainable lending space, this Framework was the first to define an entire portfolio as sustainable assets using GRESB ratings, and also the first of its kind from a real estate company in Asia Pacific for sustainability-linked bonds and loans. Under the Framework, SLL proceeds can be used to finance eligible sustainable projects as well as for general corporate purpose.
The SLL is Frasers Property’s fifteenth green and sustainability linked financing since Frasers Property raised the Group’s first green loan in September 2018. As at 31 December 2020, the Group had secured green and sustainability linked financing totalling S$4 billion.
To further its aspirations in sustainability for the real estate space, Frasers Property has set a target to finance the majority of its new green and sustainable asset portfolio with green and sustainable financing by 2024. This is one of five new goals announced in January 2021 and detailed in its FY2020 sustainability report, which includes its Group-wide commitment to be a net-zero carbon organisation by 2050.
Specific to its Australian business, Frasers Property’s operations are certified carbon neutral under the Australian Government’s Climate Active Carbon Neutral Standard. FPA and FPIA have set net-zero carbon target in development and operation by 2028 and 2030 respectively, of which both plans are approved Science-Based Targets2. For its new developments in Australia, Frasers Property is aiming to achieve a five-star GRESB rating, with at least a four-star rating for its existing portfolio.
“There are multiple potential advantages for lenders in making sustainable finance available to businesses involved in projects and practices that will generate better, more sustainable outcomes,” Ms Hoskins says.
“It means they can fulfil their immediate social imperatives while also creating long-term alignments with organisations with robust sustainability platforms, which are better placed to succeed and navigate a more sustainably-aware future operating environment,” she says.
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