HSBC structures ‘Sustainability Linked Loan’ for Square Group

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DHAKA, June 23, 2020 (BSS) – The Hongkong and Shanghai Banking Corporation (HSBC) in Bangladesh has arranged the country’s first ever Sustainability Linked Loan for Square Group.

The total facility of US$118 million (approximately Taka 1,000 crore) worth of sustainable finance has been structured to align Square Group business to better long-term renewable energy usage, said a press release.

Sustainability linked loans aim to improve the borrower’s sustainability profile by aligning loan terms to the borrower’s performance against pre-determined Sustainability Performance Target (SPT) benchmarks.

For example, the interest rate under the relevant loan agreement may be reduced where the borrower satisfies a pre-determined SPT threshold or vice versa.

By linking the loan terms to the borrower’s sustainability performance, borrowers are economically incentivised to make improvements to their sustainability profile over the term of the loan.

Square Group is one of the pioneer signatories of the United Nations Global Compact (UNGC), which encourages businesses worldwide to adopt sustainable and socially responsible policies and to report on their implementation. This particular proposition will reward the Group for improving their sustainability profile by aligning credit terms to a set of agreed sustainability performance metrics.

As Square Group achieves the pre-determined renewable energy targets mutually agreed with HSBC, it will become eligible for interest rate reductions for the loan.

The deal was launched through a virtual session attended by Dr Tawfiq-e-Elahi Chowdhury Bir Bikram, Power, Energy and Mineral Resources Affairs Adviser to the Prime Minister as the chief guest and M Humayun Kabir, Executive Director, Bangladesh Bank as the special guest.

Tapan Chowdhury, Managing Director, Square Group, Laura Galvin, Regional Head of International Markets, Commercial Banking, HSBC Asia Pacific, Md Mahbub-ur-Rahman, Chief Executive Officer, HSBC Bangladesh and Riaz A Choudhury, Country Head of Wholesale Banking (interim) were present along with other senior officials.

Dr Tawfiq-e-Elahi Chowdhury said, “Congratulations to HSBC and Square for launching this unique initiative even during this otherwise crisis time. It will, hopefully, encourage other financial institutions to follow the suit.

Sustainability is a buzzword —this one operationalizes the goal into initiative in financial market. My prayers for those who lost their lives, kudos for the frontline workers of COVID-19 and best wishes for HSBC and Square for promoting sustainability through financial instruments, combining business profit with responsibility. Credit also goes to Bangladesh Bank for supporting such initiative.”

Speaking at the landmark signing, Tapan Chowdhury said, “Square Group and HSBC have always pioneered positive change across industries. Sustainability sits at the core of Square’s purpose and is dear to my heart. We are delighted to see Square to be the first Bangladeshi organisation to utilise a Sustainability Linked Loan and we look forward every success of this project, with the aim of building a sustainable world for future generations.”