Sustainable finance
Sustainable finance
A natural extension of the long-term commitment to sustainability across the multi-national Frasers Property Group is the development of a framework for sustainable finance, enabling the growth of green loans, bonds and financial models anchored to our performance on key sustainability metrics.
On 22 January 2020, Frasers Property Australia launched our Sustainable Finance Framework, provided below.
The information contained herein is for information purposes only and does not constitute an invitation or offer to acquire, purchase, or subscribe for any securities.
1. Introduction
Frasers Property Australia Pty Limited (“FPA”) and Frasers Property Industrial Australia Pty Limited (“FPI”) (collectively the “Companies”), are Australian division of Frasers Property Limited (“Frasers Property” or the “Group”). Both Companies are Australia's leading diversified property groups and has over 90 years’ heritage in Australia. FPA’s activities cover the development of residential land, housing and apartments, commercial, retail and investment property ownership and management, and property management. FPI’s activities cover the development of industrial properties and industrial property investment property ownership.
Frasers Property Limited is a full-fledged international real estate company and one of Singapore’s top property companies with total assets of S$38.7 billion as at 31 March 2020. Frasers Property's assets range from residential, retail, commercial and business parks, to industrial and logistics in Southeast Asia, Australia, Europe, United Kingdom and China. Its well-established hospitality business owns and/or operates serviced apartments and hotels in over 70 cities across Asia, Australia, Europe, the Middle East and Africa.
Sustainability drives FPA and FPI business strategy
A Different Way is the Companies’ strategy for sustainable business growth. This strategy defines a whole new way of thinking and working that helps the Companies to boldly grow its business in ways beneficial towards its people, customers, and the environment. It also helps the Companies deliver better outcomes and achieve its goal of making a real difference in sustainability. Under the strategy, both FPA and FPI aim to identify relevant present and future issues, and outline the steps required to achieve great results.
A Different Way enables the Companies to create smarter and more innovative spaces and places. It also means that resources are reused, recycled, and restored. It is already leading to lower utilities bills for its clients, access to more affordable choices, and safer, healthier, and more connected environments in which to live, work, and play.
A Different Way focuses on three core pillars, namely Progressive Thinking, People Focused, and Responsible Resources. Each pillar is supported by ambitious goals and targets that pinpoint how the Companies plans to make a difference.
FPA and FPI are committed to transparent disclosure of its achievement against its targets. Full details and the progress report can be found on https://www.frasersproperty.com.au/a-different-way.
Sustainability Performance of FPA and FPI
Both FPA and FPI endorse and participate in global initiatives such as the Global Real Estate Sustainability Benchmark (GRESB) to align its business with the global sustainability trends, which allow it to proactively identify and implement best business practices.
GRESB is an investor-driven global ESG benchmark for the real estate sector. Its ESG assessment offers high-quality ESG data and powerful analytical tools to benchmark ESG performance, identify areas for improvement, and engage with investors. The Assessment is shaped by what investors and the industry consider to be material issues in the sustainability performance of real estate investments. The methodology is consistent across different regions, investment vehicles and property types and aligns with international reporting frameworks.
FPA and FPI have prepared this Sustainable Finance Framework (the “Framework”), with the intention for the Companies and their subsidiaries entering into multiple Sustainable Finance Transactions (“SFTs”).
The SFTs may include:
- debt instruments that finance green or sustainable projects, including but not limited to, Green Bonds, Sustainability Bonds, Green Loans, Sustainability Loans and
- debt instruments where its funding cost is linked to the Companies’ sustainability targets, including but not limited to, Sustainability-Linked Bonds and Sustainability-Linked Loans.
This Framework is designed to provide an overarching criteria and guidelines how the Companies and their subsidiaries will manage the proceeds raised from the SFTs.
Frasers Property AHL Limited (“FPAHL”), as a subsidiary wholly owned by FPA jointly with FPI, intends to become the first entity to raise a SFT under this Framework.
The Framework is prepared to be in line with the relevant international principles and guidelines listed below (collectively the “Principles”), to ensure that the SFTs meet the market best practices and demonstrate robust management of its SFTs.
- Green Bond Principles (“GBP”) 2018, Sustainability Bond Guidelines (“SBG”) 2018 and Sustainability Linked Bond Principles (“SLBP”) 2020 by the International Capital Market Association (“ICMA”);
- Green Loan Principles (“GLP”) 2020 and Sustainability Linked Loan Principles (“SLLP”) 2020 by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndications and Trading Association.
For the avoidance of doubt, the SFTs may be in any currency, tenor, or with other terms and conditions, including covenants, to reflect the Companies’ financing strategy.
The first part of the Framework will be used for debt instruments that finance green or sustainable project, including but not limited to, Green Bonds, Sustainability Bonds, Green Loans, Sustainability Loans. Following the Principles, the Framework has below four core elements:
I. Use of Proceeds
II. Process for Project Evaluation and Selection
III. Management of Proceeds
IV. Reporting
I. Use of Proceeds
The net proceeds raised under this Framework will be used exclusively to finance or re-finance the Eligible Green or Sustainable Projects as defined below:
Green Buildings:
- Investment properties: expenses for a portfolio of existing or refurbished buildings, including but not limited to retail, office, and industrial buildings, that has achieved 4 Star rating from the latest available GRESB Benchmark Report - Standing Investment.
- Development Assets: expenses for a portfolio of new residential, retail, commercial and industrial buildings that has achieved 4 Star rating from the latest available GRESB Benchmark Report - Development.
For the avoidance of doubt, the scope of the Companies’ GRESB Real Estate Assessment covers all the assets either wholly or partially owned by the Companies.
The Eligible Green or Sustainable Projects shall be selected and evaluated following Companies’ sustainability goals and ESG policies as stated in Section II. Process for Project Evaluation and Selection.
Eligibility Criteria
GRESB evaluates performance against 7 sustainability aspects with approximately 50 sustainability performance indicators relating to energy, GHG emissions, water, waste, and health and safety. This assessment considers both environmental and social aspects of property portfolios.
The GRESB Rating is based on the GRESB Score and its quintile position relative to all participants in the GRESB Real Estate Assessment, with annual calibration of the model. A ranking relative to all participants on a global scale is provided. GRESB 5 Star is the highest rating and recognition for being an industry leader.
In addition to its focus on environmental impacts, the GRESB Real Estate Assessment also includes a health and well-being evaluation of a real estate company’s internal approach to promoting health for its employees as well as its external approach to promoting health for tenants and communities through real estate fund management. As creators of the built environment, the real estate industry is well-positioned to address key health determinants in their approach to real estate development and management.
Starting from 2018, GRESB introduced its Resilience Module as an optional supplement to the Real Estate Assessment to evaluate the organization’s capacity to assess and respond to risks and opportunities related to climate, environmental, social, economic, technological and geographical changes. To demonstrate its strong commitment in sustainability and management capabilities, the Companies has taken a proactive approach to participate in this voluntary module and achieved the highest ranking among its peer participants in the Asia-Pacific region.
II. Process for Project Evaluation and Selection
Project evaluation and selection is a key process ensuring that the financed Green or Sustainable Projects meet the eligibility criteria set out in this Framework. The treasury team will be responsible for selecting a portfolio of Eligible Green or Sustainable Projects (“Eligible Green or Sustainable Project Portfolio”) to be financed by the net proceeds from the SFTs in accordance with the Framework. It may consult internal or external experts as relevant to assess eligibility criteria, and the final projects selection will be reviewed and approved by the Companies senior management.
The Companies’ sustainability strategy, A Different Way, has been established in 2015 and targets are reviewed every 2 years to ensure that they deliver value to customers and represent leadership. Once the revised company-wide targets are fully endorsed by the Companies’ Chief Executive Officer (“CEO”), they are made public through the Companies’ website with twice yearly progress updates. Targets are resourced appropriately to support their implementation into the Companies’ operations. The relevant Sustainability Manager is responsible for tracking performance against these targets.
- by 30 September 2024 to maintain minimum 4 Star GRESB status for FPA and FPI;
In an unlikely event that the Companies does not maintain minimum 4 Star GRESB status during the life any SFT, the Companies will develop a separate green or sustainable project list to ensure the Companies have sufficient green or sustainable assets matching the total SFT outstanding amount.
III. Management of Proceeds
The Companies intend to allocate the net proceeds from the SFTs to an Eligible Green or Sustainable Project, selected in accordance with the use of proceeds criteria and evaluation and selection process presented above. As long as the SFTs are outstanding, the treasury team will manage the project register through its rigorous internal system, and periodically monitor the balance of the proceeds. The Companies will strive to maintain a level of allocation for the Eligible Green or Sustainable Project Portfolio which matches or exceeds the balance of net proceeds from its outstanding SFTs.
Any unallocated amount will be held in cash or it will be invested by the Companies’ cash equivalents according to the treasury department’s general liquidity guidelines.
IV. Reporting
The Companies commit to transparent reporting on its sustainability efforts and the allocation of SFTs.
For Green or Sustainability Bonds, from the first anniversary of any bond issuance under this Framework until full allocation of the proceeds, the Companies will ensure that information on proceed allocation is available on the Companies’ website https://www.frasersproperty.com.au/A-Different-Way. The Companies may also share, where applicable and feasible, information on environmental impacts of its portfolio.
For Green or Sustainability loans, the Companies will also make the information readily available to its lenders a report upon request (provided that is deemed to have provided the information if such information is available in their website).
The Companies may share the below information:
a) Allocation Reporting
- The total amount of proceeds allocated to the Eligible Green or Sustainable Project Portfolio
- The balance of unallocated amount, if any
b) Impact Reporting
Where relevant and feasible, the Companies may provide the following environmental indicators of its portfolios:
- Updated rating of GRESB Benchmark Report for Standing Investment and Development
- Number [or percentage] of buildings with Green Building Certificates
- Energy Consumption (MWh) for the investment properties
- GHG emission (tonnes) for the investment properties
This second part of the Framework is prepared to provide guidelines for Sustainability-Linked Bonds and Loans. For the avoidance of doubt, proceeds from the Sustainability-Linked Bonds and Loans are not exclusively for Eligible Green or Sustainable Projects and can be used to finance general corporate purpose.
2.2.A Sustainability-Linked Loans
The Framework is presented in accordance with the Sustainability Linked Loan Principles (“SLLP”) 2020 with following four core components:
I. Relationship to Borrower’s Overall Corporate Social Responsibility (“CSR”) Strategy
II. Target Setting – Measuring the Sustainability of the Borrower
III. Reporting
IV. Review
I. Relationship to Borrower’s Overall Corporate Social Responsibility (CSR) Strategy
As shared in the Section 1, the Companies have established A Different Way as a core sustainability strategy since 2015 to ensure they deliver value to customers and represent leadership. This strategy defines a whole new way of thinking and working that helps the Company to boldly grow its business in ways beneficial towards its people, customers, and the environment. It also helps the Company deliver better outcomes and achieve its goal of making a real difference in sustainability agenda.
II. Target Setting – Measuring the Sustainability of the Borrower
The Companies may use below sustainability metrics for its margin or coupon redetermination over the life of the loans.
- overall rating by GRESB on its portfolio, to be assessed on the annual basis
- number [or percentage] of buildings with pre-defined green building certificates
- energy consumption (MWh) for the investment properties
- GHG emission (tonnes) for the investment propertieswater consumption (m3) for the investment properties
- or any other environmental or social metrics that the Companies deem material to its business.
When entering into a new transaction, the Companies and arranging banks may agree below items at inception:
- a set of sustainability metrics
- the respective base lines
- performance targets to be measured annually
- timeline for measuring and reporting
- commercial terms and potential incentives once the targets are achieved.
The Companies aim to ensure the selected metrics and targets are set to be meaningful and ambitious, in line with its sustainability leadership.
III. Annual Reporting
At the inception of each transaction, the Companies and arranging banks will agree on reporting time, frequency, and format of reporting on its sustainability progress.
The Companies will provide relevant information to its lenders as stipulated in the loan documentation either upon request or is deemed to have provided the information if such information is available in their website.
IV. Review
The Companies aim to ensure accurate representation of performance towards selected targets and intends to conduct external reviews, as necessary.
2.2.B Sustainability-Linked Bonds
The Framework is presented in accordance with the Sustainability Linked Bond Principles (“SLBP”) 2020 with following five core components:
I. Selection of Key Performance Indicators (KPIs)
II. Calibration of Sustainability Performance Targets (SPTs)
III. Bond characteristics
IV. Reporting
V. Verification
I. Selection of Key Performance Indicators (KPIs)
The Companies have set sustainability indicators as per below:
- overall rating by GRESB on its portfolio, to be assessed on the annual basis
- number [or percentage in GFA] of buildings with pre-defined green building certificates
- energy consumption (MWh) for the investment properties
- GHG emission (tonnes) for the investment properties
- water consumption (m3) for the investment properties
II. Calibration of Sustainability Performance Targets (SPTs)
The Companies aim to ensure the selected metrics and targets are set to be meaningful and ambitious, in line with its sustainability leadership. Companies’ SPTs are available on the Companies’ website https://www.frasersproperty.com.au/A-Different-Way.
The Companies may use above commitments for its margin or coupon redetermination over the life of the instruments.
III. Bond Characteristics
The net proceeds raised from the bonds will be used exclusively to finance or re-finance the Companies with strong sustainability commitments as described above.
When entering into a new transaction, the Companies and arranging banks will agree below items at inception:
- a set of sustainability metrics
- the respective base lines
- performance targets to be measured periodically
- timeline for measuring and reporting
- changes in commercial terms related to the SPTs.
IV. Reporting
At the inception of each transaction, the Companies and arranging banks will agree on reporting time, frequency, and format of reporting on its sustainability progress.
Information related to the Companies’ sustainability performance against the set targets will be available in the progress report published on the Companies’ website https://www.frasersproperty.com.au/A-Different-Way.
V. Verification
The Companies endorse and participate in global initiatives such as the Global Real Estate Sustainability Benchmark to align its business with the global sustainability trends, which allow it to proactively identify and implement best business practices.
Third party external assurance provider will provide a limited assurance report on the Companies’ performance indicators.
The Companies aim to ensure that this Framework was prepared in line with the relevant Principles and will develop appropriate knowledge and expertise in the Companies, and intends to conduct external reviews to the Framework, as necessary.
Version 2.0, 1 October 2020
_1 https://gresb.com/2019-real-estate-results/
2 https://gresb.com/2019-real-estate-results/
Frasers Property acknowledges the Traditional Custodians of the land on which our business operates. We pay our respects to Aboriginal and Torres Strait Islanders Elders past, present and future.