Manager case study: Swire Properties

Hong Kong-listed Swire Properties places ESG performance and data at the center of its sustainable development strategy.

Identifying opportunities through annual benchmarking

With the goal of becoming the leading sustainable development performer in the real estate industry globally by 2030, Hong Kong-listed Swire Properties is focused on strengthening its sustainability performance and positioning amongst its real estate peers. Through participation in the GRESB
Assessment and the process of annual benchmarking, Swire Properties seeks to identify existing strengths as well as potential opportunities for further improvement within its sustainable development strategy.

In recent years, the developer noted that renewable energy adoption in some of its assets was relatively low compared to other industry leaders across the GRESB Benchmark. As a result, Swire Properties began to explore options for off-site renewable energy procurement in some of its Chinese Mainland portfolios.

When the Sichuan Provincial and Guangdong Provincial Governments introduced a new policy in 2020 and June 2021 respectively to allow enterprises to procure renewable electricity from registered energy retailers, Swire Properties moved swiftly and embraced the opportunity to secure a power purchase agreement. Shortly after, the entire Sino-Ocean Taikoo Li Chengdu and Taikoo Hui mixed-use developments, including both landlord and tenants’ operations, were 100% powered by renewable electricity generated via off-site hydro, solar, and wind power facilities.

“Swire Properties is one of the first real estate developers in the Sichuan and Guangdong Provinces to accomplish net-zero carbon in its annual electricity consumption for landlord and tenants’ operations,” said Patrick Ho, Deputy Head of Sustainable Development at Swire Properties. “This milestone will allow Swire Properties to reduce the annual CO2e emissions of Sino-Ocean Taikoo Li Chengdu and Taikoo Hui by approximately 7,000 tonnes and 12,000 tonnes, respectively, and increase its mix of renewable electricity in the Chinese Mainland portfolio to approximately 47%.”

Enhancing tenant-landlord collaboration on ESG

In addition to using the GRESB benchmarks to continually improve its performance, Swire Properties finds that ESG reporting and ESG-related data have become integral to its corporate strategy, business development, external communications, and stakeholder engagement processes. ESG performance data has proven particularly valuable in meeting tenants’ increasing demand and expectation of a landlord’s ESG-related performance and provisions.

Building on the basic premise of a green lease, Swire Properties launched its Green Performance Pledge (GPP) in August 2021. The pledge covers the entire tenancy cycle in the two core areas of fit-out and operations, focusing on creating a significant impact in terms of energy, water, and waste reduction. This performance-based program gives tenants access to a multitude of green technologies and tools, guidelines, and sustainability advisory services from Swire Properties for enhancing tenant-landlord collaboration.

“At Swire Properties, we are committed to developing long-term and mutually beneficial relationships with our tenants, positioning ourselves as a partner who can help them achieve their sustainability goals. We believe tenant-landlord collaboration is critical to driving change in the industry and
enhancing sustainability performance in the long run,” said Ho.

As of June 2022, 36 office tenants covering more than 1.8 million sq ft — representing approximately 22% of occupied lettable floor area from the Company’s Hong Kong office portfolio — have signed up. The GPP will also be piloted in the Company’s Chinese Mainland portfolio in 2022, with the goal of engaging 50% of office tenants in Hong Kong and the Chinese Mainland by 2025.

Building a green financing strategy

Access to accurate and validated ESG data has also been instrumental in supporting Swire Properties’ green financing strategy. Through participation in the GRESB Assessments and the broader process of ESG reporting, Swire Properties has been able to collect and report detailed ESG data to link the Company’s ESG performance with a number of green financing instruments and mechanisms.

In 2019, Swire Properties became the first company in Hong Kong to launch a financing mechanism with an interest rate indexed against improvements in its year-on-year ESG performance. The agreement converted an existing five-year revolving credit facility of HKD 500 million into a sustainability-linked loan, with a reduction in the facility’s interest rate granted each year as long as Swire Properties:

• Retains its listing on DJSI World
• Achieves a target reduction in energy use intensity, measured in kWh/m2 each year, for its Hong Kong portfolio

In June 2022, Swire Properties secured three additional sustainability-linked loan facilities totaling HKD 3.5 billion, using the same criteria. These loans are being used to finance designated green projects such as green building development and the adoption of advanced energy- and water-saving technologies.

“As of June 30, 2022, around 45% of the Company’s current bond and loan facilities are from green financing,” said Ho. “Through financing mechanisms ranging from green bonds and green loans to sustainability-linked loans, Swire Properties is committed to supporting the transition to a low-carbon,
more resource-efficient and sustainable economy in the region.”