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First Hong Kong green bond comes from controversial real estate firm

Real estate heavyweight Link REIT issues 10-year notes

Controversial real estate heavyweight Link REIT has priced a $500m green bond – the first out of Hong Kong.
Link, which has come under fire from politicians and local people in recent years for its business practices, is Asia’s largest real estate investment trust, with nearly 12 million square feet of retail space across Hong Kong, Beijing and Shanghai. It also has 72,000 car parking spaces.
It has sold the 10-year notes with a coupon of 2.875%. No investors were disclosed.
Hong Kong’s chief secretary, Carrie Lam, was reported earlier this year to have said she was considering taking legal actions against Link, which subsequently suspended all property sales pending a review by government of its business strategies.
A number of public protests have taken place against the firm, which trades on the Hong Kong stock exchange, with a focus on what campaigners describe as Link’s upscaling of established shopping areas in public housing estates, causing rents for shop owners to almost double and forcing a high proportion of independent businesses to close or move elsewhere. Financial Director Hubert Chak has reportedly countered the allegations, saying the firm spends hundreds of millions of dollars annually on corporate social responsibility activities.The green bond is part of Link’s current environmental initiatives, which include the aim of reducing energy consumption by 30% by the end of the decade, from 2010 levels, retrofitting existing buildings to reduce GHG emissions and promoting green transport by installing bike racks and electric vehicles changing stands.

It has also “begun to explore reducing its water consumption” and improving waste management, according to Sustainalytics, who performed a second-party opinion on the transaction.
The second-party opinion says proceeds from the transaction will be used to fund or refinance buildings that already have, or are expected to secure, sustainability ratings from the international LEED building standard, or Hong Kong’s own BEAM programme. Other eligible projects include those that reduce energy efficiency by 15%, and those that improve waste reduction, water efficiency and the adoption of low-carbon transport.
Sustainalytics described Link’s efforts to impact energy efficiency as “a step in the right direction”, and said the bond was in-line with the Green Bond Principles. It did not address Link’s broader ESG credentials.
Elsewhere, Aurora in Colorado is planning to issue $415.4 million of green bonds to finance water projects, while the Treasury Corporation of Victoria is expected to become the first state body to issue a green bond out of Australia.