Sembcorp Marine has secured a S$500 million (US$375.2 million) sustainability-linked financing facility referencing the Singapore Overnight Rate Average (SORA) from DBS Bank.
The loan, believed to be the first of its kind for the maritime industry, has two interest rate components, namely a compounded daily SORA rate calculated in arrears and an applicable margin. Sembcorp Marine will enjoy interest rate discounts if it achieves pre-determined environmental, social and governance (ESG) targets.
Sembcorp Marine's group finance director William Goh comments: “The inclusion of green financing dovetails with our strategic transformation and pivot since 2015 to provide innovative engineering solutions to the global offshore & marine and energy industries, with a keen focus on cleaner, greener and renewable energy solutions. This sustainability-linked financing complements our ongoing efforts to proactively manage the environmental impact of our business.”
In 2019, some S$530 million of Sembcorp Marine’s projects were related to green solutions, including scrubber and ballast water management system retrofits, as well as gas and renewable energy projects.
The company has also introduced more green features in its operations. In 2019 it partially replaced its grid-supplied electricity with clean energy harnessed from the solar roof installed at the steel fabrication facility at its Tuas Boulevard Yard. The solar source generated more than 5,000 MWh of electricity (or clean energy to power about 1,100 four-room flats annually), enabling Sembcorp Marine to avoid emissions of approximately 2,100 tonnes of carbon.
To increase its support for businesses seeking to achieve their sustainability ambitions, DBS has committed to finance S$50 billion in renewable, clean-energy and green projects by 2024, more than doubling its earlier target of S$20 billion. DBS is also the first Singapore bank to offer transition financing and launched the world’s first sustainable and transition finance framework and taxonomy to help clients advance on sustainability agenda.
With the impending discontinuation of interest rate benchmarks such as the London Inter-bank Offered Rate (LIBOR) and Swap Offer Rate (SOR), DBS has been partnering its clients to achieve a smooth and seamless transition to alternative Risk Free Benchmark Rates (RFRs).
The bank has closed more than S$1 billion in loans referencing the RFRs in 2020 and along the way, broke new grounds such as the first SORA club loan coupled with a cross-currency swap and Singapore’s first business property mortgage loan referencing SORA.