Leading the automotive club: Geely Auto’s global green loan

China’s Geely Auto Group has successfully road-tested its new sustainable finance framework with the first overseas sustainable club loan for a Chinese automaker.  

The three-year US$400 million facility was arranged by seven international banks, including BNP Paribas, and was oversubscribed – a sign of Geely’s strong standing in the financial markets and the credibility of its sustainability agenda.  

By opting for a club loan rather than a wide syndication, Geely took the initiative to originate and structure the transaction and was able to complete the financing quickly as it looks to accelerate its transition from petrol-powered to low-carbon vehicles.  

China’s automobile market is the world’s largest: according to the China Association of Automobile Manufacturers (CAAM), sales are projected to reach 27.5 million this year – a 5.4% increase over 2021. But new-energy vehicles, including hybrid and pure electric cars, are set to rise a staggering 47% to 5 million. Decarbonising this rapidly growing industry will be critical to China’s ambitions to reach net zero carbon emissions by 2060 – and deliver a substantial boost to global net-zero efforts.  

Sustainable acceleration 

Geely has embraced decarbonisation as a cornerstone of its business. Electric and plug-in hybrid models accounted for 20% of its sales in the first half of 2022, and the company expects the proportion to reach 50% next year.  

Volvo Cars, the Swedish brand acquired by Geely’s parent company in 2010, has pledged to stop producing cars with combustion engines – including hybrid models – by 2030.  

Geely’s strong sustainability track record has earned it a place in the Hang Seng ESG 50 Index, the Hang Seng Sustainable Development Business Benchmark Index, and the Fulbright Social Responsibility Index. The company’s decarbonisation goal is a 25% reduction in vehicle lifecycle carbon emissions by 2025 and complete carbon neutrality by 2045. The company is also committed to setting science-based targets under the Science Based Targets Initiative (SBTi).  

The sustainable financing framework, launched in May, marks a step-change in Geely’s environment, social and governance (ESG) programme by tying its financing strategy with the highest global standards of ESG best practices. The framework integrates sustainability across all aspects of the company’s operations and has been verified by Sustainalytics.  

Geely will use the proceeds of the loan to support research and development (R&D) into clean energy technologies and vehicles. It will also fund new production and distribution facilities that meet a range of environmental and social criteria. These include green transportation and buildings, the use of renewable energy, enhancing energy efficiency, managing water and waste through a circular economy approach, and preventing pollution. The social criteria comprise specific projects to advance economic opportunities and equity for disadvantaged communities.  

Great responsibility 

Based in Hangzhou, China, Geely Auto operates 12 plants that employ more than 50,000 people. It has five global R&D centres globally, in Hangzhou, Ningbo, Gothenburg, Coventry and Frankfurt. Its facilities build electric vehicles under several brands including Geely Auto, Lynk & Co, Zeekr, and Geometry. In 2021, these brands sold more than 1.32 million EVs, enabling Geely Auto to maintain its status as the best-selling Chinese automaker for a fifth consecutive year. 

“Geely Auto has been proactive in initiating this pioneering green club loan, sending a clear signal of its intention to be a leader in greening China’s vast automotive industry,” said CG Lai, China CEO at BNP Paribas. “The company clearly understands its responsibility towards the communities in which it operates and the impact it can have on the planet’s future.”   

BNP Paribas has enjoyed a long and productive relationship with Geely Auto, including the 2015 creation of Genius Auto Finance, a joint venture to provide consumer vehicle financing in China.  According to Dealogic, BNP Paribas completed a total of 15 green club loans worldwide in the first half of 2022, ranking among the top three in the world.