Taipei Fubon Commercial Bank (台北富邦銀行) yesterday approved a three-year sustainability-linked loan (SLL) to audio electronics maker Merry Electronics Co (美律實業), the first such loan granted by a local bank.
However, the bank did not reveal the amount of the loan.
Foreign banks were the first to offer SLLs in Taiwan. DBS Bank Taiwan (星展銀行) provided NT$2 billion (US$70.66 million at the current exchange rate) of SLLs to AU Optronics Corp (友達光電) in 2019, followed by HSBC Bank (Taiwan) Ltd’s (匯豐台灣商銀) two SLLs totaling NT$450 million to Taya Group (大亞集團) and Sinbon Electronics Co (信邦電子) last year.
Photo: CNA
Like HSBC Taiwan and DBS Taiwan, Taipei Fubon would lower the loan’s interest rate if the borrower’s sustainability performance improves, which includes greenhouse gas emissions, power management and energy efficiency, the bank told the Taipei Times.
HSBC Taiwan also encouraged its borrowers to use the loans for their operations related to green energy or greenhouse emissions reduction, but Taipei Fubon said it has no such requirements.
“While green loans are only used to finance green projects, capital from SLLs can be used for general corporate purposes, according to the sustainability linked loan principal set by the Asia Pacific Loan Market Association,” the bank said.
“This would provide more flexibility for borrowers, but we would incentivize them to improve sustainability performance by rate cuts,” it said.
The Financial Supervisory Commission is looking into the international standards on SLLs and would consider issuing guidelines for banks on the conditions to approve such loans, a commission official familiar with the matter said by telephone yesterday.
The guidelines might have a definition of SLL, as well as regulations about banks’ and debtors’ information disclosure about how the special loans boost companies’ sustainability performance, the official said.
“The Taipei Exchange has named 16 specific purposes for which the proceeds from a sustainable bond can be used, such as green energy, water conservation, affordable housing and food safety, and the proceeds from an SLL might apply to the same purposes,” the official said.
Companies should set a sustainability target before taking out a loan, and explain how they would appoint an independent third-party agency to evaluate if the debtors meet their targets, the official added.
Banks can set their own rules until the commission issues guidelines, but they should confirm that the loans are utilized properly, the official said.
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