The increasing awareness of green growth and sustainable development is driving banks and companies towards a new set of priorities and presenting opportunities for those willing to commit and invest in ESG (Environmental, Social and Governance) strategies.
China Construction Bank (Asia) Corporation Limited (“CCB (Asia)”), the flagship overseas branch of China Construction Bank Corporation (“CCB Group”) in Hong Kong, recorded strong growth in ESG financing this year, despite a challenging operating environment.
For the first seven months of this year, the number of ESG loans closed by CCB (Asia) increased by more than 50% compared to the full year of 2021, while the volume of ESG loans underwritten by the bank jumped by more than 75%.
Daphne Wat, deputy chief executive of CCB (Asia), said ESG is a theme that banks cannot neglect as governments around the world push for the transition to a green, low-carbon future globally and the associated need for financing presents tremendous opportunities for the banking sector.
China, the world’s second largest economy, has pledged to peak its carbon dioxide emissions by 2030 and become carbon neutral by 2060 under its “dual-carbon” goals. The country is projected to invest the equivalent of US$75trn (Rmb487trn) in carbon neutrality financing over the next 30 years, according to a research report by the Green Finance Committee of China Society for Finance and Banking released late last year.
“CCB (Asia) has proactively responded to the policies and targets of mainland China and HKSAR to achieve carbon neutrality,” said Wat, adding that such a strategy also aligns with its parent firm CCB Group’s determination and commitment for carbon footprint management.
CCB (Asia) marks its 110th anniversary this year, originated in 1912 as Bank of Canton before the acquisition by China Construction Bank, one of China’s big four banks, in 2006.
It has expanded its dedicated ESG team in the past few years and revised its workflow procedure to position itself as a green bank. Even its office building in Central – the CCB Tower – is one of the few buildings in Hong Kong to be bestowed the EDGE (Excellence in Design for Greater Efficiencies) green building certification, given by the International Finance Corporation, a member of the World Bank Group, in 2021.
CCB (Asia) has always been a forerunner in driving a sustainable future by supporting businesses in going green. The lender has completed a number of landmark ESG deals this year. In April, it closed the largest sustainability-linked syndicated loan in Asia Pacific this year for Syngenta Group (HK) Holdings, a unit of central state-owned enterprise Sinochem Holdings. The US$4.5bn three-year debut SLL for Syngenta was upsized from an initial target of US$1.5bn and attracted a total of 29 international banks despite volatile market conditions. CCB (Asia) acted as the sustainability structuring advisor for the transaction.
More recently, the bank has successfully closed deals that combine different product elements in a single loan. In June, it closed the first dual-structured social and sustainability-linked loan for China Resources Medical Holdings (“CR Medical”). The HK$700m (US$89m) loan marked the first social and sustainability-linked loan given by a Hong Kong-incorporated Chinese bank, demonstrating its commitment in green transformation and innovation capabilities.
Wat noted that companies are making sustainability and ESG a central component of their business models. In order to support businesses in going green, Wat said the bank’s green finance team has committed to provide diversified capital and financial services that fit its clients’ distinctive needs.
“We see a virtuous circle here: when clients see the benefits of a truly helpful green finance solution, this would encourage them to further explore with us for even more ways and solutions for sustainable corporate development,” she said.
It is an important milestone for CR Medical given that it is the first social and SLL for the healthcare arm of China Resources Group and the proceeds will be used to fund the acquisition of medical institutions in mainland China. “We’ll continue to fulfill our social responsibilities, improve the construction of the ESG system, and contribute to the realization of China’s dual-carbon goals,” a spokesperson at CR Medical said.
Shortly after the closing of CR Medical’s deal, CCB (Asia) signed another landmark deal with Henderson Land Development, which comprised a HK$1bn SLL and a HK$100m social loan, with an independent third-party reviewer for verification. The social loan was the first-ever social loan for a leading Hong Kong property developer.
Andrew Fung Hau-Chung, executive director and chief financial officer at Henderson Land, said the deal is a good demonstration of the company’s longstanding pledge to improve community well-being. “We are committed to minimizing our environmental footprint while maximizing contributions to address environmental and social issues.”
The developer has pledged to achieve BEAM Plus Gold Rating or above for all new office developments and reduce energy intensity by 20% from baseline year 2019 for its Hong Kong portfolio by 2030.
Being one of the top 10 banks in Hong Kong in terms of asset size and loan league table, CCB (Asia) can count prominent local blue-chip companies as well as retail and small and medium-sized enterprises among its clients. This year alone, it has provided SLLs to top companies including CK Asset Holdings, Kerry Properties, HKR International and Wheelock Properties.
As one of CK Asset’s principal bankers, CCB (Asia) in January provided a HK$3.5bn SLL to facilitate and support the company’s environmentally and socially sustainable economic activity and growth.
“Working closely with CCB (Asia), we have determined two meaningful and achievable environmental targets related to electricity consumption and greenhouse gas emissions. These targets will help guide us in addressing ESG issues that are material to our businesses.” said Edmond Ip Tak-Chuen, deputy managing director at CK Asset.
Despite the outstanding performance in ESG financing for CCB (Asia) this year, including in the bond market, Wat said there is still room to improve. “Our green assets as a percentage of total assets are still in the low single-digit range. We would like to do more to promote the green economy, increasing to double digits, hopefully, in the next five years.”