HSBC Continental Europe, a subsidiary of UK lender HSBC, has issued a €66 million green loan facility to finance the Janki shopping centre in Warsaw, requiring borrower Cromwell Property Group to report on indirect emissions.
Cromwell, an Australian-listed company, sourced the loan – its second green financing facility – on the basis it reports on the renewable energy usage and annual greenhouse gas emissions of the 657,000 square feet asset.
In addition, the sponsor has also agreed, in any given reporting year, to ensure at least half of new leases include clauses that cover Scope 3 emissions – indirect emissions that occur in the activities of an organisation.
Afraz Ahmed, head of treasury for Cromwell’s European operations, said the inclusion of this type of term reflected the maturation of sustainable lending as European debt providers strive to meet their own green commitments.
“Lenders are very motivated as they have their own internal goals to reach environmental targets,” Ahmed said. “We’ve noticed this change since the beginning of the year.
“Every lender has made commitments in terms of what it will finance. [Setting] tangible achievements and having robust information [from borrowers] provides the evidence they’ve achieved their own targets. That helps them achieve their goals.”
Lara Young, Cromwell’s group head of ESG, said lenders were therefore seeking borrowers that could set targets around Scope 3 emissions, in a sign of “growing sophistication” in sustainability-linked lending.
“Cromwell has not shied away from tackling our Scope 3 emissions, which are our tenants’ Scope 1 and 2 emissions, for example energy and water consumption and waste generation,” Young explained. “We are working towards quantifying and reducing these emissions despite them not being Cromwell direct emissions as we look to tackle our whole life cycle impact.
“As the industry has become more mature, there is a need to drive bigger benefits and prioritise the right initiatives. Lenders, investors, and asset managers are focusing on metrics and targets that drive substantial change.
“Five years ago, even a year ago, the ESG targets that were relevant at the time didn’t move the needle so much. But there has been a maturation in green lending, whereby everyone is getting a better sense of what is and isn’t going to lead to real change.”
Young added there is an increasing expectation among lenders for data and information that quantifies carbon reductions. She said Cromwell – which has €7.6 billion of assets under management in Australia, New Zealand and Europe – was therefore focusing on equipping tenants with the means to share their data with them.
“If you can provide hard numbers around quantified savings [and] reduction achievements, there is value in being able to demonstrate improvements [to lenders],” she said. “We have invested a lot of effort into ensuring we have data coverage and are using that data in a consistent way, and we are trying to do this consistently across our portfolio.”
Ahmed added that the company had a strong relationship with HSBC, which provided the previous loan on the Janki shopping centre. “ESG is one of our core principles as a business and HSBC appreciated we had a sustainable finance framework, which shows we are committed to ESG and collecting the right metrics to show progress.”