For Hong Kong-based conglomerate New World Development (NWD), sustainability has been a key focus area, particularly over the last few years.
As one of the companies at the forefront of generating momentum for sustainable development and financing in the APAC region, NWD has already racked up many firsts to its credit.
For instance, last year, NWD became the first corporate in the world to issue a USD-denominated social and green dual tranche offering in the public markets; besides being the first non-financial corporate in Asia to issue a USD-denominated social bond in public markets.
In 2018, the conglomerate secured the first green construction loan in Hong Kong; and in 2021, NWD was the first real estate developer in the world to price a USD denominated sustainability linked bond (SLB) with a performance target aligned to the company’s renewable energy roadmap.
These changes tie back to NWD’s New World Sustainability Vision 2030. Launched in 2018, this framework has helped the company drive sustainability across four main pillars:
Green: A greener future by minimising environmental impact
Wellness: The promotion of health in body and mind
Smart: Using innovation to unlock potential
Caring: Creating shared value for all stakeholders
Edward Lau, CFO at NWD said, “We are committed to building sustainable communities. To do so, we take a lifecycle approach to property, adopting sustainable practices at every stage, from design to operations and engagement.”
The framework has been responsible for NWD’s most ambitious sustainable finance program so far — the recent social and green dual tranche bond. Subscriber interest has been high, with the bonds being oversubscribed nearly five times. Over 100 quality investors have participated on each tranche.
Speaking about the transaction, Lau said, “As the first non-financial corporate out of APAC to issue a USD social bond, we needed to balance investors’ requirements of minimum bond size and high demand for a social product, while also exercising prudence in terms of allocating proceeds. Accounting for all these considerations, we felt $200 million was a sweet spot. There was no nervousness around being the first non-financial corporate in the world to launch this deal, because we had carefully evaluated the market, respective offering size and timing of the issuance.”
Elaborating on the steps taken to get the timing of the deal right, he added, “The biggest challenge was to catch the right market window. We were ready to launch early as May, but markets were very volatile, and there was a rate hike in March by 25bps, followed by another hike in May by 50bps. We managed to catch the tight but right window to launch the deal and the outcome was a great success.”
Funds raised through the social bond will be invested in eligible projects, including those related to affordable housing, cultural and heritage preservation, socio-economic advancement and employment generation, and increased access to basic infrastructure and essential services.
Lau said, “Our sustainable finance framework has recently been updated to reference the latest international standards and guidelines. Some changes we incorporated this time to make the framework more robust include setting a timeframe of 24 months for proceeds allocation and adding exclusionary criteria.”
For its SLB raised in 2021 — the first issued by a real estate developer — NWD developed a framework and received a positive second party opinion from Sustainalytics. The goal for this SLB is NWD’s interim target from its roadmap of using 100% renewable energy in its Greater Bay Area (GBA) rental properties by FY 2026. Lau said, “Should we fail to achieve the target, the group will purchase carbon offsets in an equivalent amount to 25 basis points per annum for the remaining life of the bond.” The SLB was well received by international investors, reaching six times oversubscription at its peak, as they viewed the financial penalty as a clear demonstration of the company’s commitment to sustainable development.
NWD has been an early supporter of the HKEX’s Core Climate international carbon marketplace. The conglomerate successfully sourced and purchased high-quality voluntary carbon credits verified against the Verified Carbon Standard by Verra. Lau said, “At NWD, we are taking ambitious climate action to achieve our near-term science-based target and net-zero commitments. This platform will help to tackle our shared climate crisis through global connectivity and accelerate the transition to net-zero.”
Speaking about the future of ESG in the region, Lau believed that investor interest and the growth of social bonds in the region reflected a diversification of sustainability objectives. He added, “We are excited about the future development of ESG in Hong Kong. There will always be more to learn, adopt, and drive. ESG in Hong Kong is not as mature as some other markets, but we see significantly more efforts and focus in recent years.”
Recent policies have driven green finance in Hong Kong solidifying its reputation as the sustainable finance hub in the region, said Lau. For instance, the Government Green Bond Programme demonstrates support for sustainable development and determination to combat climate change, promoting awareness of green finance, and serving as a good example for issuers. Lau said, “The oversubscription of the government’s inaugural retail green bond in May 2022 was especially inspiring and a strong indication of the public’s awareness of green finance and its importance in combating climate change.”
When it comes to reporting, Lau expected more corporates to submit to ratings agencies such as S&P Corporate Sustainability Assessment (behind Dow Jones Sustainability Index), Sustainalytics, etc. for third-party, independent assessment of their ESG integration.
In conclusion, he said, “In the past, significant efforts were devoted to 'E', but recently, we’ve been happy to see from the latest CG Code and recent HKEX initiatives that 'S' and 'G' will also be driving forces to ensure a more holistic ESG development.”
