ASEAN's Largest Banks Go Big On Green Real Estate

Southeast Asia's largest banks are rushing to finance building projects tied to sustainability, even as the world's most indebted property developer, China Evergrande, sends chills through the country's real estate sector. The region's biggest names, including Singapore's DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank, as well as Malaysia's Malayan Banking, are jostling to support projects that incorporate environmental, social and governance objectives. ESG goals are meant to hold companies to certain ethical standards in their business activities, for instance, ensuring that the environmental impact of a construction project is minimized from inception to completion. In Thailand, Asia Capital Real Estate, a private equity firm with offices in New York and Singapore, is developing an environmentally friendly rental apartment complex in Phuket. The 505-unit project boasts features such as solar panels and energy-efficient appliances. Designed to meet green building standards set by the International Finance Corporation, a World Bank subsidiary, the project aims to achieve a more than 40% reduction in energy and water use compared with a conventional building. It has received a 675 million baht ($20 million) green loan from UOB Thailand for construction. Under the terms of the loan, the bank will record and monitor the borrower's management of funds, as well as track sustainability metrics agreed upon with the company. Global appetite for green loans has surged. Sustainable lending totaled $321.4 billion in the first half this year, according to financial data provider Refinitiv, more than tripling year-ago levels and setting a record for a first half. The second quarter saw a 35% increase versus the first quarter of this year and marked the second consecutive quarter of more than $100 billion in loans. But while the largest lenders in the Association of Southeast Asian Nations are warming to the idea of bankrolling eco-friendly projects, they still have significant room to grow in this area compared with their peers in the West. Refinitiv's data showed that European borrowers accounted for 45% of sustainable lending during the first half of this year, with lending in the Americas accounting for 43% of such activity during the period. The Asia-Pacific, excluding Japan, made up just 8% of the pie.