Keppel launches Sustainability-Linked Financing Framework; secures credit facilities with DBS and UOB of $500 mil each

The sustainability-linked revolving credit facilities have preferential interest margins tied to Keppel's sustainability targets.

Keppel BN4 has announced the launch of its Sustainability-Linked Financing Framework on Jan 23, further integrating sustainability into the company’s financing strategy.

Developed in collaboration with DBS Bank D05 and United Overseas Bank U11 (UOB), who acted as joint environmental, social and governance (ESG) advisors, the framework spells out individual key performance indicators (KPIs) and sustainability performance targets (SPTs) that Keppel aims to achieve.

​​In conjunction with the framework launch, Keppel has entered into sustainability-linked revolving credit facilities with DBS and UOB of $500 million each, with tenures of up to 3 years. The facilities come with preferential interest margins which are tied to Keppel’s achievement of certain SPTs and will be stepped-up if Keppel does not achieve those SPTs.

Keppel says it intends to use the sustainability-linked facilities for general corporate purposes as well as the pursuit of business opportunities in the sustainability space.

CFO Kevin Chng says: “Keppel is committed to running our business sustainably and investing in solutions that contribute to a sustainable future. The launch of the Sustainability-Linked Financing Framework reflects our determination to embed sustainability targets across different aspects of our operations, including financing.

“Leveraging the framework, we have collaborated with our valued partners, DBS and UOB, to secure attractive revolving credit facilities, thus strengthening our financial resilience, amidst a volatile environment. We will continue to tap sustainability-linked financing where possible to realise Keppel’s purpose of creating solutions for a sustainable future,” he adds.

The framework, developed in accordance with the relevant international principles and guidelines, includes KPIs and SPTs which Keppel says are core and material to its sustainability strategy and operations. They outline Keppel’s commitment and plans to enhance its sustainability performance across the three areas.

First, the company is targeting the reduction of absolute Scope 1 and 2 carbon emissions by 50% compared to the 2020 baseline by 2030 based on a straight-line reduction.

Next, Keppel intends to grow its portfolio of renewable energy assets, including renewable energy imports and projects under development, to 7 gigawatts (GW) by end 2030, with an interim target of 4.9GW by end 2027.

Finally, the company aims to maintain a good rating of at least the 95th percentile in the Singapore Governance and Transparency Index, published by the NUS Business School’s Centre for Governance and Sustainability, CPA Australia and the Singapore Institute of Directors.

Keppel will publish updates on its progress against the SPTs in its annual sustainability report, which will be subject to independent external assurance.

ERM, the world’s largest advisory firm focused solely on sustainability, has assessed to be aligned with the International Capital Market Association sustainability-linked bond principles and sustainability-linked loan principles from the Loan Market Association in Europe, the Loan Syndications and Trading Association in the US and the Asia Pacific Loan Market Association.

Keppel’s KPIs and SPTs were also assessed by ERM, which considers the SPTs to be “strong” across the three criteria of alignment with Keppel’s sustainability strategy, credibility of the strategy to achieve the SPTs and in ambition. They are also aligned with and contribute to the United Nations (UN) Sustainable Development Goals and Singapore’s Green Plan 2030.

Since 2019, Keppel, including the listed REITs and business trust that it manages, has secured over $5 billion in green and sustainability-linked financing, including these latest facilities.

Tan Su Shan, group head of institutional banking at DBS, says: “The private sector plays a key role in leading the pace of change for the global energy transition. Engaged businesses like Keppel underscore how a commitment to sustainability can drive collective action — by setting out clear and transparent targets to help investors and banks work more seamlessly with the group to create long-term impact through sustainable financing.”

Frederick Chin, UOB’s head of group wholesale banking and markets, addss: "Keppel is instrumental in leading companies across the region to accelerate their energy optimisation plans towards meeting the international agenda for sustainable development. This latest strategic partnership with Keppel follows our recent MOU to drive the adoption of sustainability solutions for businesses across the region, enabling us to double-down on our shared ambitions to pursue environmentally and socially positive outcomes.”

Shares in Keppel closed 1 cent lower or 0.15% down on Jan 23 at $6.83.

See Also:

• Click here to stay updated with the Latest Business & Investment News in Singapore

• Singapore banks’ net bond supply could be negative in 2024, thanks to 'low' refinancing needs, 'solid' capital cushions

• RHB lowers UOB’s TP to $29.10 as it awaits 4QFY2023 results

• CDL, UOB among 320 organisations that pledge to make nature-related disclosures by FY2025

• Read more stories about where the money flows, and analysis of the biggest market stories from Singapore and around the World

• Get in-depth insights from our expert contributors, and dive into financial and economic trends

• Follow the market issue situation with our daily updates

• Or want more Lifestyle and Passion stories? Click here