AU Optronic signs Taiwan’s first sustainability-linked loan

DBS Bank Taipei Branch signed a three-year, TW$2 billion ($63.5 million) sustainability-linked loan with AU Optronics – an optoelectronic solution and LCD-LED manufacturer.

Under the terms of the conditions, the interest rate will be based on the manufacturer meeting sustainability performance targets.

DBS Bank Taiwan general manager Lim Him Chuan said that there is a growing trend for corporates to adopt more sustainable practices in their business operations. While seeking business growth, they are also considering social, environmental and governance factors.

In 2018, DBS Group inked four sustainability performance-linked loans amounting to over S$600 million ($435.8 million), demonstrating the bank’s commitment to sustainability while offering financial innovation to customers.

For DBS Bank’s sustainability-linked loans, corporates are evaluated based on an annual sustainability review report assessed by an external independent party, tracking the performance of corporates in terms of governance, environmental and social criteria. When the borrower meets or exceeds pre-determined ESG targets, the interest rate will then be reduced. Borrowers not only share their commitment to sustainability but are also entitled to a competitive interest rate.

The bank’s, head of institutional banking Tony LuoGroup further explained that unlike green loans which are used to exclusively finance or re-finance eligible green projects, capital from sustainability-linked loans can be used for general corporate purposes. This provides more flexibility to borrowers, and the impact goes beyond environmental aspects to cover comprehensive ESG developments of an organization.