Sunway REIT has joined forces with HSBC to implement its inaugural Sustainability-Linked Cross Currency Swap (CCS) in Malaysia, marking a pivotal moment in the country’s real estate investment trusts (REITs) landscape. The RM200 million CCS aligns with Sunway REIT’s long-term vision of fostering a more sustainable business and highlights the increasing industry-wide focus on sustainability within the REITs sector.
The real estate industry accounts for nearly 40% of global carbon dioxide emissions, making REITs pivotal in addressing climate change challenges and mitigating associated risks. As climate risks gain prominence, both REITs and real estate investors are recognizing the importance of integrating emission reduction strategies to enhance their competitiveness. These factors are propelling sustainability to the forefront of REITs’ business strategies.
Sunway REIT has pledged to achieve net zero carbon emissions by 2050, aligning with the Malaysian Government’s commitment to carbon neutrality. To realize this ambitious goal, Sunway REIT has set an interim target of reducing emissions by 45% by 2030 through improved energy efficiency and energy substitution. The company has also introduced a pioneering Green Lease Partnership Programme for tenants and hotel lessees, aiming for 100% participation by 2030.
The bespoke CCS offered by HSBC effectively manages both currency and interest rate risks associated with Sunway REIT’s foreign currency loan while providing direct sustainability-linked incentives. The CCS’s economic terms are intricately linked to two specific sustainability performance targets in line with Sunway REIT’s commitment to minimizing environmental impact. These targets focus on the total renewable energy generated by solar photovoltaic systems in Sunway REIT’s properties and the weighted average building energy intensity (BEI) measured per square meter of the building’s gross floor area per year.
Christina Cheah, Head of Global Banking, at HSBC Malaysia, emphasized the increased focus of the REIT industry on sustainability and the need to channel capital in more sustainable ways. By aligning the CCS with specific sustainability performance targets, HSBC has created a tailored structure that incentivizes Sunway REIT to achieve its sustainability ambitions while enabling measurable progress. This collaboration marks a significant step forward for Malaysia’s sustainable finance market and Sunway REIT’s commitment to fulfilling its ESG goals.
Dato’ Jeffrey Ng, CEO of Sunway REIT Management Sdn Bhd, highlighted the integration of sustainability into various financing facilities, following the issuance of Sunway REIT’s first sustainable finance product in 2021. The collaboration with HSBC for the execution of the sustainability-linked CCS has enabled Sunway REIT to convert over 90% of its borrowings into sustainable finance, facilitating positive environmental impact while incentivizing the company with lower financing costs.
HSBC committed to supporting its customers’ transition to net zero, is prioritizing financing and investment aligned with the goals of the Paris Agreement. With a pledge to reach net zero across its portfolio by 2050 or sooner, HSBC has committed up to USD 1 trillion of financing and investment by 2030 to help customers adopt more sustainable business practices.