CIMB allocates RM3 bln for sustainability-linked loans

KUALA LUMPUR: CIMB Bank Bhd and CIMB Islamic Bank Bhd (CIMB) recently launched its Sustainability-Linked Loans (SLLs) for corporate borrowers who are keen to enhance their sustainability performance in alignment with any of the 17 Sustainable Development Goals (SDGs).

Reinforcing CIMB Group’s sustainability leadership in Malaysia, the bank would be one of the first in the country to introduce this proposition which aims to facilitate and support environmentally and socially sustainable economic activity and growth.

SLLs are a type of financing instrument and/or contingent facility where the borrower receives financial incentives upon achieving pre-agreed Sustainability Performance Targets (SPTs). Incentives are offered, in the form of interest rate rebates, if the borrower is able to demonstrate that it has achieved its SPTs.

SLLs assist and encourage borrowers to improve their sustainability profile or commitment as the financing terms and conditions are aligned to their SPTs. Availability of the SLL incentive is from Jan 1, 2020 to Dec 31, 2024. The use of proceeds in SLLs are not necessarily limited to ‘green’ projects, but can also be for general corporate purposes.

CIMB Group chief executive officer Tengku Datuk Seri Zafrul Aziz said, “CIMB has introduced several new initiatives in the past year to intensify sustainability awareness and action with propositions that can create real, lasting impact environmentally, economically and socially (EES).

“The SLLs have been introduced from our active engagement with our clients to encourage them to embark on and further their own sustainability journeys. The SLLs are a catalyst to urge businesses to embed EES considerations in their strategies in order to operate responsibly for the long-term well-being and sustainability of our environment and communities.”

He added, “SDGs and indicators can be adjusted to be in line with our clients’ sustainability strategies and used as a guidance in the setting of SPTs.

“By working together with clients, the SLLs would be a start for CIMB to assist them to understand their EES risks and opportunities and encourage them to address those risks and leverage the opportunities.”

Among the SDGs which may be relevant to corporate borrowers include quality education; gender equality; industry, innovation and infrastructure; or even responsible consumption and production.

Examples of SPTs could include reduction in Greenhouse Gas emissions, per cent of electricity from renewable sources, reduction in waste generated, per cent of suppliers adhering to predetermined sustainability requirements, proportion of women in top management positions, reduction in lost time injury and near misses, or proportion of payroll spent on staff training and development.

The identification of suitable SPTs and their measurements could be guided by external consultants, external sustainability indices, borrowers’ internal measurement by their own established sustainability team or from CIMB’s Group Sustainability department.

The SLLs by CIMB are guided by the Sustainability Linked Loan Principles 2019 issued by the Asia Pacific Loan Market Association that advocate best market standards and practices. The principles set out a broad voluntary framework of characteristics based on four core components, which consist of relationship to borrower’s overall sustainability strategy, target setting, reporting and review.

The SLLs are another aspect of CIMB Group’s commitment to Sustainability, one of the key pillars of CIMB Group’s mid-term growth strategy, Forward23. In the last two years, CIMB Group has introduced several key initiatives in sustainability whilst creating shared value to its stakeholders.

These include the CIMB SME Renewable Energy Financing programme and the special rate financing for hybrid cars and green buildings.

In October 2019, CIMB also successfully priced its US$680 million Formosa & Reg S Sustainable Development Goals (SDG) Bond, the proceeds of which are channeled to eligible assets under the seven SDGs to which the CIMB Group has committed.



Sarawak plans Borneo Power Grid

KUCHING: Federal government is seeking to increase Malaysia’s target of renewable energy generation to 20 per cent in the next six years to improve on the energy trilemma of security, reliability and affordability.
Regionally, Asean has set out to make 23 per cent of its primary energy renewable by 2025, compared to 9.4 per cent in 2014, five years ago, in tandem with global megatrends in population growth, urbanisation and striving for green energy and transport.
There is also an Asean power grid being mooted and Sarawak has also embarked on power generation projects in Myanmar and soon possibly in other Indochina countries. North Kalimantan has hydropower potential sites with total capacity close to 12,000MW.

Annual growth in electricity demand in South East Asia could be as high as 6 per cent.
This is in line with the United Nations’ Sustainable Development Goal No. 7 to ensure access to affordable, reliable, sustainable and modern energy for all, which is supported earnestly by Sarawak government and related agencies to meet the challenges of climate change, air pollution and to improve resource efficiency.
Against this background, Sarawak aspires first to build and complete a Borneo Power Grid connecting Brunei, Sabah, Kalimantan to its massive hydroelectricity output complemented by others in Kalimantan, with potential to export power to Palawan, in the Philippines, Java and West Malaysia in future.
Sarawak Economic Planning Unit Director, Dr Muhammad Abdullah Bin Haji Zaidel said, at the recent inaugural Sustainability & Renewable Energy Forum or Saref 2019 at the Borneo Convention Centre Kuching that: “Sarawak’s hydroelectric power projects will serve as catalysts to stimulate development.”
Sarawak Energy Hydro Department Vice President Ir. Polycarp Wong explained that, “The Sarawak Corridor of Renewable Energy or Score was developed to propel Sarawak’s economy by harnessing Sarawak’s sustainable strategic advantage in the production of bulk electricity.”
Strong and robust regulation and system are key criteria for success for renewable energy, and balancing commercial, environmental aspects is very important for growing the economy, he stressed.

Dr Muhammad Abdullah: “Such development creates high-income opportunities and drive sustainable economic growth.”
“Score focuses on growing the energy sector and targets 10 high-impact priority industries, creating downstream opportunities for businesses.”
“As these energy-intensive businesses establish themselves locally, they will provide a major economic boost for other areas.”
“When Score gathers momentum, people will see a rise in their income and quality of life, including in the rural areas.”
Dr Muhammad Abdullah said that the core of Score’s development strategy lies within the abundance of inexpensive, clean, safe and renewable energy provided by its hydroelectric infrastructure as the people of Sarawak get to enjoy free water supply from 2020.
Moving forward, renewable energy will be taking a major role, displacing current mainstream fossil fuel options.
The future for renewable energy in Malaysia includes solar floating and rooftop, waste to energy as in biomass, hydro including mini hydro, biogas, and other integration with battery energy storage from wave or wind.
In South East Asia, hundreds of hydropower projects have been developed in the past 50 over years with Vietnam leading the way.
Hydropower is the third largest contributor to energy generation in South East Asia and is only outperformed by coal and gas. But total installed capacity is below 50GW unless Borneo’s hydropower is unleashed.


Electricity tariff for consumers in peninsula to be maintained

KUALA LUMPUR: The electricity tariff in Peninsular Malaysia for domestic consumers will be maintained while the surcharge for commercial and industrial users will be reduced effective Jan 1 until June 30, next year.

Minister of Energy, Science, Technology, Environment and Climate Change, Yeo Bee Yin said the Cabinet had agreed to set the rates based on the ‘Incentive-Based Regulations’ (IBR) mechanism.”

A total of RM62.95mil from the Electricity Industry Fund (EIF) will be used to cover the imbalance cost pass through (ICPT) surcharge so that it will not be imposed on domestic consumers.

“In this regard, the effective electricity tariff rate will be maintained at 39.45 sen per kWh; this is a continuous 18 months with no increase through surcharge for domestic consumers, “ she said.

Yeo said this in response to Khoo Poay Tiong (PH-Kota Melaka) during the Minister’s Question Time at Dewan Rakyat yesterday.

Khoo had asked about the status of the IBR mechanism to determine the electricity tariff for the peninsular every six months and whether there would be an increase in January 2020.

According to the minister, 7.4 million domestic consumers would be exempted from paying surcharge while non-domestic consumers would enjoy a surcharge reduction of 0.55 sen per kWh from RM2.55 per kWh.

She said the surcharge on commercial and industrial users was reduced in light of lower fuel costs over the last 6 months. — Bernama


Nature and the global economy

In nature, everything is connected. This is equally true of a healthy environment and a healthy economy. We cannot hope to sustain life without taking care of nature. And we need healthy economies to lift people out of poverty and achieve the United Nations Sustainable Development Goals.

In our current model these goals sometimes seem to collide, and our economic pursuits encroach too closely on nature. But nature—a stable climate, reliable freshwater, forests, and other natural resources—is what makes industry possible. It is not one or the other. We cannot have long-term human development without a steady climate and a healthy natural world.

Out of touch
The bottom line is that when we damage the natural world, we damage ourselves. The impact of our growing economic footprint threatens our own future directly. By some estimates, more than 50 percent of the world’s population is now urbanized, increasing the likelihood of people losing touch with nature.

With the projected rise in ocean levels and increase in the average temperature of the planet, large swaths of land, even whole countries, will become uninhabitable, triggering mass climate-induced migration. Never has it been more important to understand how the natural world works and what we must do to preserve it.

A necessary first step is to recognize that waste is the enemy. Wasting food, energy, or materials flies in the face of sustainability. Producing plastics fated to end up as litter is a waste, especially when these plastics pollute our oceans. If we could live by the simple injunction to “do no harm,” both individually and as businesses and economies, we could all make a difference. Overconsumption and unsustainable production have put the planet in peril.

Natural connection
Since the natural and economic worlds are linked, similar principles apply to both.

In the financial world, for example, we would not eat into capital to the point of depletion because that would bring about financial ruin. Yet in the natural world, we have done this repeatedly with fish stocks and forests, among many other resources—in some cases to the point of decimation. We must treat the natural world as we would the economic world—protecting natural capital so that it can continue to provide benefits well into the future.

This is something economists can appreciate—the importance of minimizing waste, taking advantage of efficiencies, and accurately reflecting costs in prices, including costs imposed on our entire shared resource, the environment.

We can take the important step of ensuring that the price of fossil fuel energy reflects not only production costs but also environmental costs—a price tag on carbon and other greenhouse gases. We must eliminate energy subsidies that encourage a continued search for new fossil fuels or that promote overuse and waste—harming both natural and human health. IMF research has found that the implicit global subsidy from undercharging for energy and its environmental costs in 2017 was a staggering $5.2 trillion, or 6.5 percent of world GDP.

Change begins now
When it comes to sustaining the vital symbiosis between the economic and the natural world, we all can do more—much more. The private sector can stop supporting or subsidizing industries and activities that damage the planet and instead invest in sustainable development. Governments can roll out policies to fight climate change and the destruction of nature, for example, through promotion of clean-technology research and development.

Change must begin now, and it must encompass us all. The youth of today understand this—think about courageous young people like Greta Thunberg and others like her. They are calling on older generations to act now to reverse climate change—because it is their futures at stake. Because of these younger generations, there is hope.

Nature is resilient. We can still reverse some of the damage we have inflicted on our precious planet. But time is running out. If we don’t take decisive action in the next 10 to 20 years, the damage will have passed irreversible tipping points.

We must work in concert and on several fronts, and we must do it now.

For who among us wants to face harsh reproach from our grandchildren: “you knew it was happening, and you did nothing.”

Feature image credit to IMF

Global shift to sustainability

Globally, the transformative impact for businesses to embrace and drive sustainable development is on the rise. With the age of social media, increasing levels of public awareness exert more pressure on companies to pursue a larger social and environmental purposes, other than just augmenting profits.

Terms such as “People, Planet, Profit,” “Environmental Social and Governance (ESG) standards,” “Impact Financing,” “Green Investing,” “Sustainable Business,” “Social Entrepreneurship,” and “Conscious Capitalism” have proliferated in private, public, and societal spheres in order to overturn the traditional way of doing business.

While these terms seem novel, the concept of sustainability was already in existence decades ago. In fact, sustainable development was described as early as 1987 in the United Nations Bruntland Commission Report as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Years later, the term “ESG” was first coined in the “Who Cares Wins Conference Report: Investing for Long-Term Value” by the United Nations Global Compact in 2005, wherein it was recognized that environmental, social, and governance factors play an important role in the context of longer-term investment.

In 2015, these principles were formally encapsulated in the United Nations Sustainable Development Goals (SDGs), as a “universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity by 2030.” The 17 SDGs — namely, No Poverty, Zero Hunger, Good Health and Well-being, Quality Education, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth, Industry, Innovation and Infrastructure, Reduced Inequality, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life Below Water, Life on Land, Peace and Justice Strong Institutions and Partnerships — recognize that “ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs including education, health, social protection, and job opportunities, while tackling climate change and environmental protection.”

As sustainable development is inarguably recognized as an issue of global importance, businesses should carefully consider the social and environmental risks and threats to their long-term corporate existence in a world of poverty, climate change, and inequality.

Seeking to be part of the solution rather than the problem, companies are created and/or reinvented to not only seek financial returns, but to further address social and environmental impacts by reducing poverty, meeting basic human needs, and ensuring fair and equal opportunities, which are all in keeping with the UN SDGs.

The understanding that businesses play a vital role in addressing the world’s complex social and environmental problems is now widely recognized. This recognition and commitment towards sustainability, most especially in the investment community, is validated in a research study conducted by Robert G. Eccles and Svetlana Klimenko, as published in the May-June 2019 issue of Harvard Business Review, wherein it was reported that ESG was a “top-of-mind” for 70 senior executives at 43 global institutional investing firms, including the world’s three biggest asset managers (BlackRock, Vanguard, and State Street), giant asset owners such as the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), and the government pension funds of Japan, Sweden, and the Netherlands.

Following this trend locally, top executives of the Philippines similarly recognize the concepts of sustainability in their businesses. In a report by PwC in collaboration with the Management Association of the Philippines (MAP) entitled “The Future of Business: Sustainability. Development. Impact,” which discusses the results of the 2019 survey of 127 CEOs in the Philippines from a mix of large (50%), medium (27%), small (14%), and micro (9%) enterprises from various sectors, over 80% of CEOs expect to change their production or service model in the next three to five years to promote more sustainable practices. Notably, in the past PwC surveys, CEOs were mostly concerned with issues related to policies and terrorism. This year, however, CEOs are acknowledging that climate change and environmental damage are serious problems that they need to face.

In the same vein, strengthening environmental protection and combating climate change are recognized by the government and civil society as one of the most important gaps which need to be closed by 2030.

In the 2019 Asia and the Pacific SDG Progress Report by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), environmental targets in the Asia Pacific Region would require a complete turnaround in order to meet the SDGs. Specifically, a quarter of Asia Pacific Region targets that have worsened are linked to natural resource management — including sustainable food production, populations suffering from water scarcity, renewable energy, management of chemicals and wastes, and the loss of biodiversity.

The South-East Asian (SEA) subregion, comprised of Brunei Darussalam, Cambodia, Indonesia, the Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Timor-Leste, and Vietnam, leads other subregions of the Asia Pacific on three goals: quality education (Goal 4), affordable and clean energy (Goal 7), and industry, innovation and infrastructure (Goal 9). According to the report, the SEA region can expect to achieve 2030 goals by maintaining the current pace of progress on all targets on affordable and clean energy except for renewable energy consumption, where every subregion in Asia-Pacific needs to accelerate progress.

While government takes the lead in achieving these sustainable development goals, the private sector is now recognized as a key player in addressing the most pressing environmental challenges in the world today.

Serious commitments on a global scale are being launched by some of the world’s leading consumer brands. Big investments to produce environmentally friendly packaging alternatives that will not compromise food quality and safety are in full swing.

The Coca-Cola Company’s “World Without Waste” initiative has committed to an ambitious goal to collect and recycle 100% of its packaging by 2030. In the country, Coca-Cola Philippines recently launched its P1-Billion PET (polyethylene terephthalate) bottle recycling facility.

Unilever’s global commitment is to ensure all of its plastic packaging is 100% designed to be reusable, recyclable, or compostable and to increase the use of recycled plastic to 25% by 2025. They will also share their technical solutions to recycle multi-layered sachets with the industry.

Due to the increasing awareness of benefits of companies to pursue a larger and societal purposes, it seems that sustainability is the new reality for businesses.

The future of sustainability rests in commitment, continuity, and innovation which require the collaborative efforts of the businesses, government and civil society.