UOB and ADDX Partner for S$50 Million Sustainability-Linked Digital Bondby Fintech News Singapore October 7, 2021
UOB and digital securities exchange ADDX have concluded the digitisation and digital custody of the inaugural sustainability-linked bond recently launched by Sembcorp Industries (Sembcorp).
The bank was appointed as a joint lead manager for the S$675 million sustainability-linked bond issued by Sembcorp, through its wholly-owned subsidiary Sembcorp Financial Services (SFS).
UOB had also partnered with ADDX to custodise and manage a S$50 million portion of the bond.
Sembcorp’s ten-and-a-half-year sustainability-linked bond is due in 2032 and has been priced at a coupon rate of 2.66 percent per annum.
Sustainability-linked bonds involve issuers pledging to improve their performance against tailor-made ESG (environmental, social and governance) targets.
Through this sustainability-linked bond, Sembcorp has committed to a Sustainability Performance Target (SPT) of reducing its greenhouse gas emissions intensity by December 2025.
If the SPT is not met, the coupon rate will step up by 0.25 percentage points per annum from the first interest payment date on or after April 2026.
The bond payment obligations of SFS will be unconditionally and irrevocably guaranteed by Sembcorp.
Frederick Chin, Head of Group Wholesale Banking and Markets, UOB said,
“The collaboration with ADDX helps our corporate clients such as Sembcorp tap the benefits of digital bond issuance for security, time and cost efficiencies.
The use of distributed ledger technology (DLT) and asset tokenisation has strong potential in radically improving how capital markets can operate in the future and it is important our clients can take advantage of such new technologies.”
Oi Yee Choo, Chief Commercial Officer of ADDX said,
“The collaborative work by UOB and ADDX was pioneering in nature because it involved a sustainability-linked bond.
As digital bonds enter a phase of widespread adoption, the cost of fundraising through bonds and other fixed income instruments will continue to fall, and companies that embrace the new technology will be able to raise capital more efficiently.”
Featured image: Edited from Unsplash