Surbana Jurong Group, a Singapore-based global urban, infrastructure and managed services consulting firm, on February 3 priced a S$250 million (US$186.60 million) sustainability-linked bond, representing the first Singapore dollar-denominated sustainability-linked bond and the first public sustainability-linked issuance from a Southeast Asia-based company. This is also the first Asian sustainability-linked bond to feature a premium step-up at maturity.
The unrated 10-year deal was priced at par with a coupon of 2.48%, or a spread of 132bp over Singapore dollar swap offer rate (SOR). With the sustainability-linked structure, Surbana Jurong was able to further expand and diversify its investor base as the deal was more than six times oversubscribed, attracting an order book in excess of S$1.7 billion. Several of the institutional investors participating in this offering are also investors in the group’s first bond issued in September 2018 amounting to S$350 million.
The latest offering features sustainability performance targets such as a 10% reduction in Scope 1 and 2 greenhouse gas emissions intensity expressed as a total amount of tonnes of carbon dioxide equivalent per full-time employee (net of carbon offsets) generated by the relevant businesses from a base financial year ending December 31 2022 and net zero carbon emissions status (net of carbon offsets) at the Surbana Jurong campus by August 30 2030.
The targets are aligned with Surbana Jurong’s net zero carbon buildings commitment to the World Green Building Council, which aims to see 100% uptake of net zero carbon buildings by 2050.
If the sustainability goals are not met, Surbana Jurong has committed to pay investors a premium payment of 0.75% of the redemption amount at maturity. The bond is issued in accordance with its newly-established sustainable finance framework, guided by the Sustainability-Linked Bond Principles (2020) developed by the International Capital Market Association (ICMA).
Commenting on the structure, Surbana Jurong group CFO Andy Atkin says: “Within Surbana Jurong’s sustainable finance framework is an innovative financing structure featuring a premium payment if the company falls short of its sustainability goals. By introducing this premium step-up structure at maturity and working with clients and partners to deliver ESG-focused outcomes, we continue to strengthen our commitment to sustainability.”
He notes that the sustainable bond grant scheme by the Monetary Authority of Singapore (MAS), enhanced to cover the sustainability-linked bonds, will spur more firms to adopt sustainable practices through green and sustainability-linked financing.
Adds Surbana Jurong group chief executive officer Wong Heang Fine: “By tying our sustainability targets to our bond financing terms, we are drawing a clear alignment between our financing strategy and our business strategy, anchored on ESG.”
Proceeds from the bond, which was drawn under the company’s US$1 billion multi-currency debt issuance programme, will be used to fund future growth, refinance existing credit lines and provide working capital. The deal will also boost the group’s efforts to translate the UN Sustainable Development Goals (UN SDGs), set out in the 2030 agenda, into concrete and measurable actions.
ANZ is the sole sustainability structuring adviser for the transaction, as well as a joint bookrunner and lead manager along with DBS. ANZ head of sustainable finance international Stella Saris Chow says the bond issuance demonstrates Surbana Jurong’s strong leadership in establishing a comprehensive sustainable finance framework and willingness to provide a premium payment to investors should it not meet its ambitious climate targets by 2030.
DBS global head of fixed income Clifford Lee says the sustainability-linked bond ticked many firsts in Asia’s deepening ESG financing landscape. “It is an exciting development that serves to expand the breadth of sustainability-linked instruments to further the sustainability drive in the region. The resounding reception to the bond’s issuance is testament to Surbana Jurong Group’s credit strength and business model, as well as the market’s endorsement of sustainability-linked instruments, paving the way for a new wave of such products in the near future,” he adds,
The bond offering is supported by a pre-issuance report from PricewaterhouseCoopers and will be subject to annual reporting and periodic verification by a third-party adviser.