CIMB allocates RM3 billion for Sustainability-Linked Loans

5 January 2020

The proposition reinforces CIMB’s commitment to work with clients to create real and lasting EES impact

Kuala Lumpur : CIMB Bank Berhad and CIMB Islamic Bank Berhad (collectively “CIMB” or “the Bank”) recently launched its Sustainability-Linked Loans (“SLLs”) for corporate borrowers who are keen to enhance their sustainability performance in alignment with any of the 17 Sustainable Development Goals (SDGs). Reinforcing CIMB Group’s sustainability leadership in Malaysia, the Bank would be one of the first in the country to introduce this proposition which aims to facilitate and support environmentally and socially sustainable economic activity and growth.

SLLs are a type of financing instrument and/or contingent facility where the borrower receives financial incentives upon achieving pre-agreed Sustainability Performance Targets (“SPTs”). Incentives are offered, in the form of interest rate rebates, if the borrower is able to demonstrate

that it has achieved its SPTs. SLLs assist and encourage borrowers to improve their sustainability profile or commitment as the financing terms and conditions are aligned to their SPTs. Availability of the SLL incentive is from 1 January 2020 to 31 December 2024. The use of proceeds in SLLs are not necessarily limited to ‘green’ projects, but can also be for general corporate purposes.

Tengku Dato’ Sri Zafrul Aziz, Group CEO of CIMB Group said, “CIMB has introduced several new initiatives in the past year to intensify sustainability awareness and action with propositions that can create real, lasting impact environmentally, economically and socially (“EES”). The SLLs have been introduced from our active engagement with our clients to encourage them to embark on and further their own sustainability journeys. The SLLs are a catalyst to urge businesses to embed EES considerations in their strategies in order to operate responsibly for the long-term well-being and sustainability of our environment and communities.”

“SDGs and indicators can be adjusted to be in line with our clients’ sustainability strategies and used as a guidance in the setting of SPTs. By working together with clients, the SLLs would be a start for CIMB to assist them to understand their EES risks and opportunities and encourage them to address those risks and leverage the opportunities,” he added.

Among the SDGs which may be relevant to corporate borrowers include Quality Education; Gender Equality; Industry, Innovation and Infrastructure; or even Responsible Consumption and Production. Examples of SPTs could include reduction in Greenhouse Gas emissions, percent of electricity from renewable sources, reduction in waste generated, percent of suppliers adhering to predetermined sustainability requirements, proportion of women in top management positions, reduction in lost time injury and near misses, or proportion of payroll spent on staff training and development. The identification of suitable SPTs and their measurements could be guided by external consultants, external sustainability indices, borrowers’ internal measurement by their own established sustainability team or from CIMB’s Group Sustainability department.

The SLLs by CIMB are guided by the Sustainability Linked Loan Principles 2019 issued by the Asia Pacific Loan Market Association that advocate best market standards and practices. The principles set out a broad voluntary framework of characteristics based on four core components, which consist of relationship to borrower’s overall sustainability strategy, target setting, reporting and review.

The SLLs are another aspect of CIMB Group’s commitment to Sustainability, one of the key pillars of CIMB Group’s mid-term growth strategy, Forward23. In the last two years, CIMB Group has introduced several key initiatives in sustainability whilst creating shared value to its stakeholders. These include the CIMB SME Renewable Energy Financing programme and the special rate financing for hybrid cars and green buildings. In October 2019, CIMB also successfully priced its USD680-million Formosa & Reg S Sustainable Development Goals (SDG) Bond, the proceeds of which are channeled to eligible assets under the seven SDGs to which the CIMB Group has committed.