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Aldar’s sustainability-linked loan first of its kind for green financing in MENA real estate

AldarProperties2
The new financing deal between Aldar and HSBC underlines a growing interest in green financing and sustainability-linked loan facilities in the MENA region.

Aldar Properties recently signed an agreement with HSBC over an AED 300 million five-year sustainability-linked loan. The green financing facility links interest margin payable with sustainability targets, and makes Aldar the first company in the MENA region to avail a sustainability-linked loan, the company said.

The financing received under the sustainability-linked loan will be used for general corporate purposes. This includes rolling out company-wide ESG initiatives.

The interest margin will be adjusted on an annual basis, according to targets set across energy and water intensity, waste recycling and worker welfare. These targets are in line with Aldar’s corporate strategy for sustainability, as well as sustainability priorities in the wider real estate industry.

Further, Aldar has committed fixed investments to at least one ESG project if it does not reach its annual targets under the terms of the green financing deal. The loan has been structured according to the Sustainability-Linked Loan Principles provided by the Loan Market Association, Asia Pacific Loan Market Association, and Loan Syndications and Trading Association.

Up to 70% of emissions in large cities were associated with buildings, Mohammed Al Marzouqi, HSBC UAE’s Head of Global Banking, said. “By securing the first LMA Sustainability Linked Loan Principles compliant facility in the real estate sector in the MENA region, Aldar not only demonstrates its commitment to addressing these relevant ESG issues in the sector, but also sets an important precedent in the region.”

GREEN FINANCING ON THE RISE IN MENA REGION

Although the agreement between Aldar and HSBC is a first for MENA’s real estate sector, green financing and sustainability-linked loan issuance is on the rise for the region. Green and sustainability-linked loan financing reached USD 6.4 billion in the first half of this year, surpassing green financing volumes for the whole of 2020 (which stood at USD 4.7 billion).

Green financing and sustainability-linked loan issuances in the MENA region for H1 2021 went up by about 38% as compared to all of last year. Focus industries for such financing include project finance, refinance and general corporate purposes, in addition to real estate. Most of the growth in green financing and sustainability-linked loan facilities is connected with the Red Sea Development’s USD 3.8 billion green loan secured in March this year.

In addition to the Aldar-HSBC agreement, this year has also been one of many firsts for green financing transactions in the MENA region. This includes the first sustainability-linked loan to refinance existing debt, issued by Emirates NBD, as well as the first Swiss franc-denominated and Chinese Yuan-denominated green bonds, both issued by FAB.

 

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