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Japan’s Hulic Co. issues bond that punishes for missed environmental impact targets

ImpactAlpha, August 26 – An increasing number of sustainability-linked loans reward companies with lower interest rates if they meet environmental and social milestones (see, “An incentive for companies that deliver on sustainability: lower-cost capital). Japanese real estate developer Hulic Co. is taking an opposite approach with a 10 billion yen ($94 million) sustainability-linked bond: if it misses its green targets, it will pay investors an additional 10 basis points, Bloomberg Green reports.

Hulic intends to use the bond’s proceeds to convert its headquarters and subsidiaries’ office buildings to 100% solar electricity, and to build a new commercial facility in Tokyo made with domestically-grown wood.

In February, BNP Paribas closed a sustainability-linked loan with JetBlue Airways that included a provision for a lowered interest rate if the airline improves its environmental, social and governance score. Other companies with sustainability-linked credit and bonds include investment firm Neuberger Berman and Johnson Controls.

U.S.-based Beneficial Returns, Australia’s IIG, Germany’s Roots of Impact and East Africa-focused iungo capital all offer financing terms tied to businesses’ positive impact achievements (see, Incentives for driving impact in deal and fund structures).

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