Sustainable finance

1. Introduction

Frasers Property Australia Pty Limited (“FPA”) and Frasers Property Industrial Australia Pty Limited (“FPIA”) (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. FPIA’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$39.2 billion as at 31 March 2021. 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 FPIA 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 FPIA 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 Acting Progressively, Focusing on People and Consuming Responsibility. Each pillar is supported by ambitious goals and targets that pinpoint how the Companies plans to make a difference.

FPA and FPIA 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 FPIA

Both FPA and FPIA 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. FPA has been acknowledged as Global Sector Leader in two categories in the GRESB rankings in 2020, being named the Global Development Sector Leader – Residential (including FPIA development activities) and the Global Non-listed Sector Leader – Diversified Office/Industrial, in combination with FPIA. FPA has been participating in GRESB since 2012 and has competed with a growing international field of real estate companies in these categories and the second year it has won Global Leadership categories.

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 FPIA 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”), 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”) 2021, Sustainability Bond Guidelines (“SBG”) 2021 and Sustainability Linked Bond Principles (“SLBP”) 2020 by the International Capital Market Association (“ICMA”);
• Green Loan Principles (“GLP”) 2021 and Sustainability Linked Loan Principles (“SLLP”) 2021 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 projects, including but not limited to Green Bonds, Sustainability Bonds, Green Loans and 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.

Eligibility Criteria

The GRESB Real Estate Assessment generates two benchmarks: the GRESB Real Estate Benchmark and the GRESB Development Benchmark. The GRESB Real Estate Benchmark consists of participants completing both the Management and Performance Components and the Development Benchmark consists of participants completing both the Management and Development Components.

• Management Component - Measures the entity’s strategy and leadership management, policies and processes, risk management, and stakeholder engagement approach, comprising information collected at the organisational level.
• Performance Component - Measures the entity’s asset portfolio performance, comprising of information collected at the asset and at the portfolio level, including environmental indicators such as Energy, Greenhouse Gas (“GHG”) and Water as well as social aspects related to Tenants and Community.
• Development Component – measures the entity’s efforts to address ESG issues during the design, construction, and renovation of buildings. This Component is suitable for entities involved in new construction (building design, site selection and/or construction) and/or major renovation projects, with on-going projects or completed projects during the reporting period.

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.

In addition, the Companies may also use the proceeds to finance or re-finance the Eligible Green Projects as defined below: Projects (incl. land, buildings) which meet or has evidence that it will meet regional, national or internationally recognised standards or certifications such as:

• Green Building Council of Australia’s Green Star - Communities, Design & As Built or Buildings: 4 Star or above
• Any other green building labels that is an equivalent standard as the above.

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.

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 FPIA;

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.

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/or Loans. For the avoidance of doubt, proceeds from the Sustainability-Linked Bonds and/or Loans are not exclusively for Eligible Green or Sustainable Projects and can be used to finance general corporate purpose.

This part of the Framework is presented in accordance with the Sustainability Linked Loan Principles (“SLLP”) 2021 and the Sustainability Linked Bond Principles (“SLBP”) 2020 with the following five core components:

I. Selection of Key Performance Indicators (KPIs)
II. Calibration of Sustainability Performance Targets (SPTs)
III. Bond/ Loan characteristics
IV. Reporting
V. Verification

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.

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. Bond/ Loan Characteristics

The net proceeds raised from the bonds/ loans 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 (e.g. coupon or margin adjustment) related to the SPTs.

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.