Sembcorp secures first sustainability-linked bond investment from IFC

THE International Finance Corporation (IFC), the World Bank Group's private-sector investment arm, and mainboard-listed Sembcorp Industries announced that the conglomerate had successfully launched a S$675 million sustainability-linked bond (SLB) on Wednesday.

The ten-and-a-half-year Singapore dollar bonds were issued with a coupon rate of 2.66 per cent under the group's S$3 billion Multicurrency Debt Issuance Programme. DBS and UOB are the joint lead managers and bookrunners for the bond.

Sembcorp priced its inaugural SLB through its wholly-owned subsidiary, Sembcorp Financial Services, which was anchored by an investment of S$150 million from IFC. This also marks IFC's first investment globally in a SLB.

Unlike traditional green bonds, SLBs require issuers to pledge performance improvements against tailor-made environmental, social and governance (ESG) targets.

The interest rate of the SLB will be stepped up by 0.25 per cent from the first interest payment date on or after April 1, 2026 if the stated sustainability performance targets of greenhouse gas emissions intensity reduction to 0.4 tonnes of carbon dioxide equivalent per megawatt hour or lower is not achieved by Dec 31, 2025.

Net proceeds from the SLB will be used to finance Sembcorp's general working capital requirements, refinancing its existing debt and financing or refinancing its renewable energy or other sustainability projects.

Sembcorp group president and chief executive officer Wong Kim Yin said that the company is "fully committed" to greening its portfolio and that it is "heartened" that the IFC chose to invest in its issuance.

"Their support validates our strategy and spurs us on in our drive towards supporting the global energy transition and a low-carbon economy," he said.

Sembcorp previously set targets to quadruple its gross installed renewable energy capacity from 2.6 gigawatts (GW) in 2020 to 10 GW by 2025. It currently has more than 3.3 GW of renewable energy capacity comprising solar, wind and energy storage solutions in markets such as Singapore, China, India, UK and Vietnam.

IFC vice-president for Asia and the Pacific Alfonso Garcia Mora also said that the success of the bond issuance showed that investors have been clear about their position on the climate crisis and are continuing to shift capital to align their portfolios with net-zero targets.

The IFC's investment in Sembcorp's SLB is in line with the World Bank Group's Climate Change Action Plan (2021-2025). Under the plan, IFC has committed to align all new real sector operations with the objectives of the Paris Agreement by July 1, 2025 and aims to reach 35 per cent financing for climate on average over the next five years.

Sembcorp shares closed at S$1.89, up S$0.05 or 2.7 per cent on Wednesday.