Chinese companies seeking ways to finance their sustainability ambitions can access a range of proven green financing tools, including green bonds and sustainability-linked loans (SLLs). These solutions are set to play a vital part as China accelerates its efforts to reach net zero emissions by 2060.
Borrowers from the carbon-intensive energy and transportation sectors have dominated China’s SLL market so far, but BNP Paribas has just arranged an SLL for fintech provider Ant Group: the first SLL by a Chinese technology firm. It’s a breakthrough that could help the digital sector – which policymakers want to contribute 10% of GDP by 2025 – finance its energy transition.
“This credit facility helps us drive forward our net zero goals via connecting it with our performance,” said Liang Cao, Group Treasurer at Ant Group. “We are proud to play a leading role in using innovative financing solutions to support the low carbon efforts of China’s technology sector.”
The bilateral sustainability-linked credit facility provides revolving credit lines to Ant Group with the interest being subject to a two-way interest rate adjustment mechanism linked to the company’s Sustainability Performance Targets (SPTs).
This mechanism will reward the company with a lower interest rate if it succeeds in reaching the SPTs linked to the facility – and a higher one if the SPTs are not met. Those SPTs require that Ant Group meets its green and sustainable development commitments, including those on reaching carbon neutrality, using renewable energy and supporting biodiversity.
Ant Group is an avid advocate for ESG development globally. Our similar vision for a sustainable future has laid the foundation for more joint achievements and innovations across sustainable finance in the future.
CG Lai, CEO, BNP Paribas China
“Ant Group is an avid advocate for ESG development globally,” said CG Lai, CEO of BNP Paribas China. “Our similar vision for a sustainable future has laid the foundation for more joint achievements and innovations across sustainable finance in the future.”
On the chain
Ant Group operates Alipay, China’s leading digital life open platform serving more than one billion users and 80 million merchants. Alipay’s escrow-like payments service, which minimizes settlement risk between buyers and sellers, is widely recognised as a global pioneer in ‘embedded finance’, or integrating financial services into digital platforms.
In keeping with Ant’s tradition of innovation, the company will report its performance against the SLL’s SPTs via distributed ledger technology (DLT), or blockchain. Using Carbon Matrix, a proprietary enterprise carbon management Software-as-a-Service (SaaS) product developed by Ant Group’s blockchain technology arm AntChain, the company will ensure that the SPT verification process is transparent and tamperproof, creating a high level of confidence in Ant Group’s decarbonisation numbers.
Ant Group has already taken bold steps to tackle its greenhouse gas (GHG) emissions across its operations and its supply chains. In March 2021 it announced that it would achieve carbon neutrality by 2030, and just over a year later, it confirmed that it had achieved its goal for Scopes 1 and 2 emissions, or those arising from its own operations. In April, Ant Group joined the Low Carbon Patent Pledge and made its green computing patents free to access for low-carbon innovators around the world.
Green tech
The terms of the new SLL will incentivise the company to continue its progress. They require Ant Group to continue to promote green and sustainable development and to achieve Scope 3 decarbonisation – across its extensive global value chain – by 2030. This includes ensuring that Ant Group’s energy supply will be 100% renewable by 2030 and that it will invest a fixed percentage of its annual operating revenue in biodiversity conservation and ecological protection.
BNP Paribas is partnering with China’s new economy companies to deliver financing that helps them pursue their sustainability goals. In the first quarter of 2022, the bank worked across a range of sectors to fund their green projects, including the first sustainable deposit agreement in China’s consumer sector and the first green bond in its auto finance sector.
We will continue to leverage the full gamut of sustainable finance solutions to support outstanding Chinese corporates on their sustainability journey in order to enhance their long-term competitiveness.
Zhang Fang, Head of Corporate Coverage China, BNP Paribas
“We will continue to leverage the full gamut of sustainable finance solutions to support outstanding Chinese corporates on their sustainability journey in order to enhance their long-term competitiveness,” said Zhang Fang, Head of Corporate Coverage China, BNP Paribas.
While growth in Asian SLL volumes has slowed this year amid greater market volatility, the market had been expanding fast as the region’s focus on decarbonisation increases. According to Bloomberg, borrowers from Asia excluding Japan raised US$52.6 billion of SLLs in 2021, over six times the amount in 2020. Chinese borrowers in the Hong Kong market accounted for $6.7 billion of that figure.
Though international market is facing tightening environment, we are optimistic about the sustainable financing opportunities in both China and the rest of APAC.
Chaoni Huang, Head of Sustainable Capital Markets Asia Pacific, BNP Paribas
“Though international market is facing tightening environment, we are optimistic about the sustainable financing opportunities in both China and the rest of APAC. SLL is certainly an effective funding tool for companies that are committed to transforming to a greener and more sustainable future,” said Chaoni Huang, Head of Sustainable Capital Markets Asia Pacific.