HSBC drives climate change agenda with 2nd sustainability loan

The Hongkong and Shanghai Banking Corporation (HSBC) in Bangladesh has structured the country’s second ever Sustainability Linked Loan (SLL) for Bangladesh Steel Re-Rolling Mills (BSRM) to drive the steel manufacturer’s sustainability agenda.

The Tk250 crore (approximately $29 million) working capital facility will be linked to improvements in BSRM’s energy efficiency, reads 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.

The deal was launched through a virtual session attended by Mohammad Ahmed Ali, executive director of Bangladesh Bank, as the chief guest.

Referring to the sustainability initiative of HSBC, Mohammad Ahmed Ali said, “The central bank’s vision is to develop sustainable banking framework and to integrate it into core business operation of banks and FIs through efficient and effective implementation of Green Banking and CSR.

“We are about to publish a contemporary Sustainable Finance framework in consultation with all the banks. Previously, to broaden the financing avenue for green products like solar energy, bio-gas plant and effluent treatment plant, etc., Bangladesh Bank established a revolving refinance scheme amounting to Tk200 crore from its own fund,” he added.

Mahbub ur Rahman, CEO of HSBC Bangladesh, said, “HSBC recently announced an ambitious plan to prioritise financing and investment that supports the transition to a net zero carbon emission, in order to build a thriving, resilient future for society and businesses.

“We have both the scale and global reach in guiding businesses through this transition to a low carbon economy and we are happy to play our part with BSRM in support of their own sustainability goals,” he further said.

Speaking at the landmark signing, Alihussain Akberali, chairman of BSRM, said that like HSBC, they have always endeavoured to bring positive change to the industry and wider society.

“I am delighted to partner with HSBC Bangladesh to join this innovative and future-ready solution,” he added.

earlier this year, arranged Bangladesh’s first-ever SLL worth $118 million (approximately Tk1,000 crore) for local conglomerate Square Group, incentivising their long-term renewable energy usage.

Among others, Kevin Green, country head of Wholesale Banking at HSBC Bangladesh, was also present at the webinar.