JSE-listed Redefine Properties has launched a R1-billion sustainability-linked bond on the JSE, which marks the largest amount raised so far by a South African real estate investment trust in what is a growing sustainability bond space.
The company explains in a release that the funds will be used to refinance upcoming bond maturities, which will allow Redefine to measurably increase the use of solar energy and enhance water efficiency at its South African assets.
The R1-billion, three-year unsecured floating rate note will mature on July 26, 2024.
Redefine says the bond issuance has exceeded expectations and recognises the company’s improved balance sheet strength, as well as bears testimony to progress made on the environment, social and governance (ESG) front.
CFO Ntobeko Nyawo says the key feature of this note is the linking of Redefine’s cost of funding to pre-agreed sustainability performance targets.
“If we achieve all our sustainability performance targets, which will be independently verified, there will be a benefit in the form of a reduction in interest rates.
“However, should we not achieve all our targets, we will continue to pay a higher interest rate. So, there is a material incentive to do what we set out to do, with a reward through reduction in interest rates which positively impacts overall cost of funding,” he explains.
A reduced interest rate of four basis points is applied to the bond price at each of the target dates – meaning an eight basis point benefit should all the targets be met.
The target observation dates are the end of August in 2022 and 2023.
Redefine has committed to the renewable energy, greenhouse-gas (GHG) emission and water efficiency performance targets date.
Renewable energy currently accounts for 5% of total energy consumption across Redefine’s South African portfolio.
“The renewable energy target will be achieved through an increase in solar energy installed measured in megawatt, with respect to the South African portion of the property asset platform.
“The target is for a 3 MW increase at each of the target dates resulting in a cumulative 6 MW installation, or 25% increase on baseline,” notes COO Leon Kok.
In terms of GHG emissions, the aim is to reduce Scope 1 and Scope 2 emissions measured in tonnes of carbon dioxide equivalent (CO2e) with respect to the South African portion of the portfolio.
By August 31, 2023, the intention is to see a cumulative reduction of 3 516 t of CO2e, or a 10% reduction on the baseline.
Redefine also intends to reduce the amount of water withdrawn from municipal and borehole sources for use at its assets – with the 2023 target being a 5.1% reduction from a baseline of 2 759 megalitres.
Nyawo says climate change has been identified by the World Economic Forum as one of the biggest risks for the global economy.
“Through our programme, Redefine is effectively rewarded for setting the pace of the transition to ESG. It is also attractive to investors over the period and sets the business on the path to achieving sustainable returns, while doing its part in contributing to global climate goals,” concludes Nyawo.