ARA LOGOS Logistics Trust (ALOG) has entered into its first $80 million sustainability-linked interest rate swap (IRS) with the Singapore branch of The Hongkong and Shanghai Banking Corporation (HSBC Singapore)

The IRS will be utilised to hedge the interest rate risk of ALOG’s borrowings.

The IRS’ economic terms are directly linked to two specific green targets agreed upon by ALOG and HSBC Singapore that are in line with ALOG’s commitment to manage environmental impacts. 

See also: 'Buy' ALOG on strong warehouse demand and continued expansion: analysts

The targets are the progressive reduction of carbon emission intensity of the multi-tenanted buildings within ALOG’s Singapore portfolio and the increased usage of renewable energy annually by a pre-determined figure.

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“Being part of the LOGOS Group, ALOG shares the same vision and commitment as its Sponsor towards investing in sustainable solutions. With sustainability integrated as part of ALOG’s long-term business strategy, green financing complements our ongoing efforts to proactively manage the environmental impacts of our business,” says Karen Lee, CEO of ALOG’s manager.

Joanna Lee, managing director, head of corporate sales, markets & securities services at HSBC Singapore, says the ESG-linked derivative transaction marks the first such transaction for both ALOG and the bank. “By linking the IRS to long-term ESG targets, we have created a bespoke structure which includes direct, measurable incentives for ALOG to achieve its sustainability targets,” she says.

As at 9.18am, units in ALOG are down 0.5 cents or 0.57% lower at 88 cents.