Aldar Properties becomes MENA’s first real estate company to secure sustainability-linked loan

Aldar Properties has signed a Dhs300m facility with HSBC that links the interest margin payable under the facility to achievement of sustainability targets.

It has therefore become the first real estate company in the MENA region to enter into a sustainability-linked financing arrangement.

The five-year term sustainability-linked loan includes a mechanism to adjust Aldar’s interest margin annually in line with achievement of targets on energy and water intensity, waste recycling and worker welfare.

The loan will be used for general corporate purposes, including the roll-out of ESG initiatives across the group.

As part of the agreement, Aldar has also committed to investing a fixed amount in one or more qualifying environmental, social and governance (ESG) projects if it does not reach agreed annual targets, according to state news agency WAM.

The transaction is structured in alignment with the Sustainability-Linked Loan Principles (SLLP) published by the Loan Market Association (LMA), Asia Pacific Loan Market Association (APLMA), and Loan Syndications & Trading Association (LSTA).

Last year, Aldar launched a sustainability strategy that focused on improving the way it does business and ensuring that the company has a positive impact on the economy, environment, people and the communities in which it operates.

Aldar’s key sustainability commitments for 2021 include the introduction of a Sustainability Data Management System (SDMS) to enhance the availability and quality of sustainability data across the business. It also supports the Task Force on Climate-related Financial Disclosures (TCFD). Aldar is also prioritising the development of an Energy Efficiency Plan to significantly reduce energy consumption across 87 assets as well as a new Waste Management Plan.

“Our financial stakeholders are increasingly factoring sustainability assessments into their portfolio strategies. At Aldar, we believe this shift in capital allocation is a positive force that creates a powerful incentive for companies to up their sustainability game to benefit from these capital flows. As a leader in our market Aldar is ideally positioned to benefit from this trend,” said Greg Fewer, group chief financial and sustainability officer at Aldar.

Mohammed Al Marzouqi, head of Global Banking at HSBC UAE added: “The real estate sector plays an important role in helping the world tackle climate change, considering up to 70 per cent of emissions in a large city are related to its buildings. By securing the first LMA Sustainability Linked Loan Principles compliant facility in the real estate sector in the MENA region, Aldar not only demonstrates its commitment to addressing these relevant ESG issues in the sector, but also sets an important precedent in the region.”

Aldar Properties reported a 17 per cent rise in revenue to Dhs8.39bn for 2020. Its 2020 gross profit also rose 8 per cent to Dhs2.98bn. Its full-year net profit decreased slightly by 2.5 per cent from Dhs1.98bn in 2019 to Dhs1.93bn for 2020.

In January, Abu Dhabi signed off on deals with Aldar worth $12.3bn. Accordingly, Aldar was entrusted with management of Dhs30bn in developments and provide oversight for projects worth Dhs10bn in education, health-care and infrastructure. It was also tasked with managing Dhs5bn of projects that were awarded by the government in 2019. Earlier this year, with Aldar Properties recording a 144 per cent year-on-year surge in its stock price, the Abu Dhabi wealth fund Mubadala sold a $950m stake in Aldar.

Read: Mubadala seizes on 144% stock rally to sell stake in Aldar Properties