HSBC Bangladesh has arranged the first sustainability-linked loan in Bangladesh as it lent $118 million (Tk 1,000 crore) to Square Group to advance its renewable energy ambitions. Under the arrangement, the credit terms of the existing working capital facility offered to Square Group will be linked to renewable energy usage by the conglomerate. The deal was launched through a virtual session attended by Tawfiq-e-Elahi Chowdhury, energy adviser to the prime minister; Mohd Humayun Kabir, an executive director of Bangladesh Bank; Tapan Chowdhury, managing director of Square Group; Laura Galvin, regional head of international markets for commercial banking at HSBC Asia-Pacific and Md Mahbub Ur Rahman, chief executive officer of HSBC Bangladesh. A sustainability-linked loan (SSL) aims to improve the borrower’s sustainability profile by aligning loan terms to the borrower’s performance against predetermined sustainability performance target benchmarks. For example, the interest rate under the relevant loan agreement may be reduced if the borrower can reach its sustainability targets. One of the targets for Square Group is to avoid carbon emissions of up to 3,000 tonnes per year, according to a presentation at the launch. By linking the loan terms to the borrower’s sustainability performance, borrowers are economically benefited when improving their sustainability profile over the term of the loan, HSBC Bangladesh said in a press release. The proposition will reward Square for improving their sustainability profile by aligning credit terms to a set of agreed sustainability performance metrics. If it can achieve the predetermined renewable energy targets mutually agreed upon with HSBC, it will become eligible for interest rate reductions for the loan. Square Group, one of the signatories of the United Nations Global Compact, which encourages businesses worldwide to adopt sustainable and socially responsible policies and provide progress reports on implementation, has installed solar panels on factory roofs with the capacity to produce 2.6 megawatts of electricity. “This is only the beginning of a new journey because we have the capacity to increase it. I hope we will soon increase it to 8 megawatts,” Square Group managing director Tapan Chowdhury said. “Sustainability sits at the core of Square’s purpose.” Tawfiq-e-Elahi Chowdhury emphasised on the need for energy efficiency in the backend by way of consuming less water, gas and power along with front-end initiatives such as solar panels. “This can help increase the productivity of industries and the sustainability of the planet,” he said while calling for the establishment of proper waste management system in the country as well. Chowdhury also said sustainability might take on a new meaning in the post Covid-19 era as there would be a lot more emphasis on self-reliance. Creative ways have to be found to use this shift to the country’s advantage. From the aspect of Sustainable Development Goals, this would be an important project, said central bank executive director Mohd Humayun Kabir. “This is a new beginning for both Bangladesh’s banking sector and business community — an important step in creating a stronger, more resilient and sustainable economy,” said HSBC Bangladesh CEO Md Mahbub Ur Rahman. “At HSBC, we are proud to play our part in structuring the country’s first sustainability-linked loan and we will continue to support the development of Bangladesh’s financial markets. “I also want to thank our regulators for their strong leadership and encouragement in driving this important initiative forward. “HSBC is committed to doing its best to support our customers and communities. I think finance has a very crucial role to play in climate change,” he said. Globally, HSBC has commitments to provide $100 billion in financing and investments by 2025 to develop clean energy, technologies with lower-carbon footprints, and other projects that contribute to the delivery of the Paris Climate agreement and the UN Sustainable Development Goals, Laura Galvin said. This means playing a lead role in the development of financial products for customers advancing renewable energy and low carbon business activities, according to the bank. HSBC Bangladesh aims to help large business groups align sustainability in their operations and shift to a carbon-free world. It looks to work with all major companies as well, said an official of the international bank in Dhaka. Riaz A Choudhury, interim country head of wholesale banking of HSBC Bangladesh, also attended the event.
