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DBS, AU Optronics sign Taiwan’s first sustainability-linked loan

DBS Bank Taipei Branch has signed a three-year, 2 billion New Taiwan dollar (S$88 million) sustainability-linked loan with Taiwanese display manufacturer AU Optronics.

A sustainability-linked loan pegs the interest rate to sustainability performance targets.

This is the first such loan in Taiwan and also the first for a tech company in Asia Pacific, the bank said in a press release on Tuesday.

The loan was evaluated based on environment, social and governance (ESG) performance metrics.

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“The core value of a sustainability-linked loan is to incentivise and reward corporations to advance their sustainability agenda,” said Tony Luo, head of institutional banking group at DBS Bank (Taiwan).

For DBS Bank’s sustainability-linked loans, corporates are evaluated based on an annual sustainability review report assessed by an external independent party, tracking the performance of corporates on ESG criteria.

When the borrower meets or exceeds pre-determined ESG targets, the interest rate will be reduced. This way, borrowers not only share their commitment to sustainability but are also entitled to a competitive interest rate.

Unlike green loans which are used to exclusively finance or re-finance eligible green projects, capital from sustainability-linked loans can be used for general corporate purposes, Mr Luo said.

Lim Him Chuan, general manager of DBS Bank (Taiwan), said: “There is a growing trend for corporates to adopt more sustainable practices in their business operations.” 

In 2018, DBS Group inked four sustainability performance-linked loans totalling more than S$600 million.

AU Optronics has been listed on the Dow Jones Sustainability Index (DJSI) for nine consecutive years. DBS said in the press release that AU Optronics has an “excellent” performance track record in corporate governance, environmental sustainability, science education, culture preservation, social citizenship and workplace inclusivity.

Listed on the New York Stock Exchange, AU Optronics specialises in making panel displays which are used for a variety of applications including televisions, desktop monitors, mobile devices, and public information displays.

DBS shares were trading down S$0.10 on the Singapore Exchange mainboard at S$25.79 as at 1.21pm on Tuesday.