December 2021

Market Overview / Update

Sustainable Financing

2

Equity Bonds LoansWorking

CapitalTrade Accounts Deposits Investments

Overview of Sustainable Financing Options

Turning Financing Needs Into Sustainable Finance & Investment

Use of Proceeds

Green

Social

Transition

Sustainability-Linked

Environmental

Social

Governance

Sustainable Finance & Investment drives better outcomes.

3

39 81 94169

341

556

1726 49

80

132

203

4648

64

86

100

216

0

100

200

300

400

500

600

700

800

900

1000

2016 2017 2018 2019 2020 2021YTD

EMEA Americas Asia-Pacific

USD

bn e

q.Sustainable Bond Market Update in 2020/2021YTD

Source: HSBC Sustainable Bond database incl PP – based on Dealogic, CBI, Bloomberg, as of 10th November 2021

The data presented above is to the best of our knowledge and may not be fully representative of the SRI market

Sustainable Bond supply: +94% 2021YTD YoY at USD976bn eq

More than +140% increase in APAC

Issuance progression – USD 573bn eq. in 2020 and USD976bn eq in

2021YTD

Sustainable Bond market accounts for 15.2% of total bond issuances in

APAC countries in 2021YTD (International Market issuances)

CAGR 2015-2020:

Global: 64%

Asia-Pacific: 76%

EMEA: 62%

Americas: 62%

Green(51%)Social(23%)Sustainability(19%)SLB(7%)

$1,549bn

Issuances by bond

type

(2020/2021YTD - Globally)

Sustainable bond market

accounting for ~11% of global

bond issuances in 2021YTD

10%

42%

32%

42%

11%

22%

7%

21%

5%

18%

0%

14%

4%

11%

3%

11%

0%

10%

20%

30%

40%

50%

2020

10-N

ov-2

1

2020

10-N

ov-2

1

2020

10-N

ov-2

1

2020

10-N

ov-2

1

2020

10-N

ov-2

1

2020

10-N

ov-2

1

2020

10-N

ov-2

1

2020

10-N

ov-2

1

India South Korea Indonesia Hong Kong China Malaysia Singapore Australia

294

55689

216

120

203

0

100

200

300

400

500

600

700

800

900

1000

2020-Nov10 2021-Nov10

EMEA APAC AMER

USD

bn

eq

. $503bn

Yearly issuance ($bn) $976bn

HSBC market

share in

LT:

Global: 5.3%

AMER:3.7%

APAC: 5.5%

EMEA:5.8%

AMER

+70%

APAC

+143%

EMEA

+89%

44

Global Sustainable Loan Market Snapshot

Source: LoanConnecter, 5 Jul 2021

USDbn

Global Green and Sustainability Linked Loan (SLL) Volumes by Type

APAC Green & SLL Volumes by Country APAC Green & SLL Volumes by Type

USDbn USDbn

Global Green & SLL Borrowers by Sector (FY20)

USDbn

Global Green and Sustainability Linked Loan (SLL) Volumes by Region

12

73

196

269

406

0

50

100

150

200

250

300

350

400

450

2017 2018 2019 2020 2021YTD

Green SLL

12

73

196

269

406

0

50

100

150

200

250

300

350

400

450

2017 2018 2019 2020 2021YTD

Asia Pacific EMEA N. America Others

510

27

45 44

0

10

20

30

40

50

2017 2018 2019 2020 2021YTD

Australia Hong Kong India Japan

Singapore Taiwan Others

510

27

45 44

0

10

20

30

40

50

2017 2018 2019 2020 2021YTD

Green SLL

15%

9%

9%

7%

6%6%5%

5%4%

34%

Utilities

Oil and Gas

General Manufacturing

Financial Services

Retail & Supermarkets

Healthcare

Telecommunications

Automotive

Business Services

Others

5

Green bond Social Bond Sustainability bond Transition Bond Sustainability linked bond

Use of proceeds

Green projects with environmental benefits

Social projects withsocial benefits

Green projects & Social projects

Transition projects: fossil fuel related but has significant environmental benefits

General corporate purposes

Bond characteristics linked to Issuer's sustainability performance?

No No No No Yes: • Structure A: financial incentive

payable to investors, via annual coupon step up or one off payment at maturity

• Structure B: other financial commitment ie purchase of renewable energy credit

Pros • The most established product in the sustainable bond market

• Grow rapidly from 2020• Highlight the issuer’s contribution to social

responsibility ie Covid-19 impact alleviation

Can potentially include a wide fossil fuel related projects (given it is on the transition trajectory leading to net zero) such as:• Gas fired power generation• LNG and LPG projects including

related infrastructure

• Flexible Use of Proceeds, no need to earmark to Green/Social projects

• One of the 1st SLB issuer in the region

Cons • Bond size may be restricted to the potential Green/Social project size

• Need to define target population for Social projects, ie to disadvantage community

• No explicit definition on Transition projects, and will require the issuer to demonstrate the chosen projects are in alignment with the transition trajectory leading to net zero by [2050/2060]

• SLB structuring is highly technical, ie how to design appropriate Key Performance Indicators (KPI), Sustainable Performance Target (SPT) and bond features

• Newest additions in the sustainable bond market, may need investor education

Precedents -Corporates

• AC energy• SK Battery• Zhongliang• Kia Motors

• Korea Land and Housing Corp

• Korea South-East Power

• Manila Water• Kaisa Group

• CAPCO • ENEL• Ultratech• NWD• Worley

Sustainable Bonds: Green, Social, Sustainability, Transition and SLB Use of Proceeds Sustainability Linked

6

Structuring a Sustainability-Linked Bond issuance

Sustainability-linked bond considerations

A sustainability-linked bond ties the interest rate on the bond to theachievement of environmental target(s)

The first step is to identify an impact metric that is core to the issuer’soperations and demonstrates material progress on environmentalperformance

The second step is to structure sustainability-linked mechanism (step-up/ step-down in the interest rate of the bond, trigger dates etc.) andcommunicate pre-issuance

o If the issuer achieves the sustainability target by the set date theinterest rate will benefit from a decrease

o In case the issuer is unable to achieve the set target it suffers apenalty on the interest rate for the remaining period of the bond

Structure a robust sustainability-linked mechanism

The metric should be aligned to the issuer’s broader sustainabilitystrategy and signal ambition to investors

The timeline should also align with a potential bond issuance

HSBC can help the issuer structure a robust sustainability-linkedmechanism, including the identification of sustainability targets,step-up / step-down in the interest rate of the bond, trigger datesand incentive mechanisms

Compared to a green bond…

The proceeds will be used for general corporate purposes, instead offinancing green assets in case of a green bonds

Issuers do not need to set up a green bond framework or identifygreen assets or get a second party opinion

The bond is not labelled as a “green” bond, thus is not be eligible tobe included in the green bond indices

Dedicated green bond funds cannot invest in it, although investorswith a broader sustainability focus can invest

2019 2020 2021 2022 2023 2024

Interest rate if target is achieved by the set date

Interest rate if target is not achieved by the set date

Set target date

Issuance date

7

Social Development – Social Focused GSSS Bonds (1)

Social Projects Examples from Sustainability Bonds

Social Eligible Categories and Projects Bond Parameters

Go

vern

men

t o

f M

alay

sia Accessibility to Quality Healthcare

Hospitals and clinics; Healthcare centres; Medical infrastructure and equipment to ensure essential health care service delivery; Medical research centres.

USD 800m - Apr 2021Maturity: 2031

USD 500m - Apr 2021Maturity: 2051

Accessibility to Quality Education and Training

Schools, universities and other higher-learning institutions; Professional development and training; Government training centres; Grants and scholarship to eligible candidate in pursuing post-graduate degree.

Accessibility to Affordable and Quality Basic Infrastructure

Affordable and high-quality homes; Rural Water Supply Programme; Water Supply and Environmental Sanitation Unit (BAKAS); Rural Electricity Supply Programme; Social Amenities Programme.

Employment Generation through Small and Medium Enterprises (SME)

SME loan schemes to support innovation and entrepreneurship across racial diversity, female empowerment, and gig works/self-employed individuals.

Financing and Microfinance Soft loans and grants to support SMEs and MSMEs to ease access to financing.

Socioeconomic Advancement and Empowerment

Micro credit financings.

Re

pu

blic

of

Ind

on

esi

a

Employment Generation (SME Financing, Microfinance, Socioeconomic Advancement & Empowerment)

Cash and basic food necessities, Health and education, Health insurance subsidy to the poor and vulnerable; Data systems Development on expenditures and quality of beneficiaries’ register.

EUR 500m - Sep 2021Maturity: 2034

Food Security and Sustainable Food SystemsSeeds provision and food production improvement; Trainings for agricultural entrepreneur; Nutrition supplementation surveillance, education and campaign, food aids, water provision, sanitation for stunting reduction; Agriculture systems R&D; Processing facilities, agriculture products marketing.

Access to Essential ServicesChildren immunization services; Surveillance on communicable and non-communicable diseases; Telemedicine; School tuition fee exemption; Improve vocational schools; School management digital platform; School operational assistance.

Affordable Basic Infrastructure

Access to proper and sustainable sanitation; Environmental infrastructure; Internet access services in the Papua Customary Territory; Broadband infrastructure; Community based settlement infrastructure;Green infrastructure to support against flood disasters; Joint Telecommunication Channel (Ducting);Base Transceiver Station/Last Mile; Satellite Capacity and Services.

Ko

rea

Exp

ress

way

Socio-economic advancement and empowerment - Covid-19 support

Deferment of rent payment for 6 months• Reduction of commission fee by 30% for the suppliers• Toll fee exemption for buses and medical vehicles (help alleviate the financial difficulties of bus

industry and to support medical staff against coronavirus)Support to SMEs hit by the pandemic through returning yearly rent deposits: the returned rent deposit (KRW190.8 billion) to tenants will be helpful to facilitate equitable participation and integration of the tenants into the market and society through reduction of income inequality

USD 500m - May 2021Maturity: 2026

8

Social Development – Social Focused GSSS Bonds (2)

Social Eligible Categories and Projects Bond Parameters

Axi

s B

ank

Socioeconomic Advancement & Empowerment

Loans to companies in deprived areas; Productive employment, decent work, include vulnerable group, equal pay for work of equal value; Gender equality – microfinance for women SHGs/onward MF companies; Women founded start-ups/MSMEs which are majority-owned or majority-managed.

USD 600m - Sep 2021Maturity: 3000

USD 40m - Apr 2019Maturity: 2024

Health, Healthcare and Wellbeing

Financing for construction, equipment or operation of activities that expand access to healthcare (e.g. public hospitals, clinics and healthcare centres; not-for-profit private hospitals). Vaccine manufacturing and distribution; Medical, healthcare, education, financial services support for natural disaster; Enhancing basic medical care, supports medical colleges and nursing colleges.

Employment generation, including through the potential effect of MSME financing and microfinance

MSME financing and microfinance – support MSMEs who suffer from natural disaster (including pandemic): loans at discounted rate and enlarged lending volume; Waiving collateral requirement with accelerated process. Loans to support the decentralized sector in input supply and marketing of artisanwork, village and cottage industries.

Education and Vocational TrainingFinancing related to the construction, equipment or operation of activities that expand access to education (e.g. Not-for-profit tertiary or vocational education); Improve educational infrastructure (e.g. construction of campuses, training facilities)

Affordable Housing and Social InfrastructureBank loans for affordable housing in India; Bank loans up to a limit of ₹5 crore per borrower for setting up schools, drinking water facilities and sanitation facilities including construction/ refurbishment of household toilets and water improvements.

Issuer Bond parameters KPI Sustainability Performance Target (SPT) Step up / Premium FrameworkExternal Review

SBT ?

NovartisHQ: Switzerland

EUR 1.85bnCoupon: 0.00%Maturity: 2028

Trigger year: 2025

Number of patients reached with Novartis medicines of Novartis’• Strategic Innovative Therapies (SITs)• Flagship Programs.

SPT 1: At least 200% increase in patients reached in Low and Lower Middle Income Countries (LMICs) with Strategic Innovative Therapies byFY 2025 (compared to 2019).SPT 2: At least 50% increase in patients reached in LMICs with the Novartis Flagship Programs by fiscal year 2025 (compared to 2019).

25bps step-up

Yes -in IP and

Bond Prospectus

Sustainalytics

NA –Social SPTs

TevaHQ: Israel

EUR 1.1bn | EUR 1.5bn | USD 1bn | USD 1bn

Coupon: 3.75% | 4.375% | 4.75% | 5.125%

Maturity: 2027 | 2030 |2027 | 2029

Trigger year for 2030 EUR note & 2029 USD

note: 2026

KPI 1.a: Number of regulatory submissions across 6 key therapeutic areas (TAs).KPI 1.b: Product volume through four access to medicine programs, including donations and social business across six key therapeutic areas.KPI 2.a: Absolute GHG Emissions reduction (Scope 1 and 2) (in tCO2e).

SPT 1.a: Increase the cumulative number of new regulatory submissions in LMICs on the WHO’s EML across 6 key TAs by 150% by 2025 vs 2017-2020.SPT 1.b: Increase access to medicine program product volume by 150% by 2025 vs 2020 through four access to medicine programs, including donations and social business in LMIC on the WHO’s EML across six key TA.SPT 2.a: 25% reduction in absolute Scope 1 and 2 GHG emissions by 2025 (vs 2019 baseline).

EUR 5.5yr: 15bp premium payment at maturity per SPT missed (max 45bp)EUR 8.5yr: 12.5bp coupon step-up per SPT missed and per annum from Nov 2026 until maturity (max 37.5bp per annum)USD 5.5yr: 15bp premium payment at maturity per SPT missed (max 45bp)USD 7.5yr: 12.5bp coupon step-up per SPT missed and per annum from Nov 2026 until maturity (max 37.5bp per annum)

Yes

ISS ESG

&

the Access to

Medicines

Foundation

Yes on the Green SPT

only

Social Projects Examples from Sustainability Bonds (con’d)

Sustainability-Linked Bonds with Social KPIs

9

INTERNALRESTRICTED

Case Study: Hospitality

HKD7,500m 4-year senior secured multi-tranche term and revolving sustainability-linked loan

In November-2019, HSBC acted as the

sole Sustainability Coordinator, Joint

Mandated Lead Arranger and

Bookrunner, Facility and Security

Agent for the Langham Hospitality

Investments Ltd’s (“LHIL”) HKD7,500m

4-year senior and secured multi-

tranche term and revolving

sustainability linked loan facilities.

The loan marks the first in Asia from a

listed hospitality company to

incorporate “Sustainability Linked Loan”

features, whereby the interest margin

adjusts dependant upon the

performance of certain hotels owned

and operated by the company against

a pre-determined set of Sustainability

Criteria/Objectives. The proceeds of

the loan will primarily be to refinance

an existing loan (4-yr HKD7,200m) and

garnered strong support from the

market, with a total of 11 lenders and

was oversubscribed by market close.

November 2019

HKD7,500m multi-tranche

term and revolving

sustainability-linked loan

facilities

Sole Sustainability

Coordinator, Joint Mandated

Lead Arranger and

Bookrunner, Facility and

Security Agent

Deal Structure

Deal HighlightsSummary Terms

Borrower LHIL Finance Limited

Guarantors

Langham Hospitality Investments Limited (“LHIL”,

SEHK ticker: 1270.HK) and selected companies of

LHIL holding the Security

Facility

Type

Senior, Secured & Transferable Sustainability-

linked Multi-Tranche Term and Revolving Loan

Facilities

Tenor 4-years for all Facilities

SecurityThe Langham, Hong Kong, Cordis, Hong Kong and

Eaton HK

Use of

Proceeds

Refinancing existing indebtedness and general

working capital requirements

HSBC RoleSole Sustainability Coordinator, Mandated Lead

Arranger & Bookrunner, Facility and Security Agent

Key example of HSBC supporting its clients by providing

innovative financing solutions that enable companies to

demonstrate their leadership in Sustainability and a testament to

HSBC’s ability to provide value-added solution to support

companies in achieving their funding objectives

The landmark transaction marked several notable achievements

including:

The first sustainability-linked loan in the hospitality

sector in Asia;

The largest public sustainability-linked loan in terms of

the size of the loan by a Hong Kong company;

The first sustainability-linked loan to utilize an

EarthCheck Performance Report as performance

benchmark.

The transaction demonstrates the growing importance of green

and sustainability-linked loans in the financing of Hong Kong’s

economy. In addition, it reflects the company’s commitment to

bring positive changes to our environment, and furthermore, to

hold themselves financially accountable for their impact on the

environment.

Company Overview

Listed in May 2013, LHIL is the first fixed single investment trust

with a focus on investing in the hospitality sector in Asia.

This business trust currently owns and operates a portfolio of three

hotels located on the Kowloon Peninsula in Hong Kong, offering a

total of over 1,600 guest rooms:

– The Langham, Hong Kong;

– Cordis, Hong Kong;

– Eaton HK.

HSBC acted as the sole Sustainability Coordinator, Joint Mandated

Lead Arranger and Bookrunner, Facility and Security Agent for this

HKD7,500m 4-year senior and secured multi-tranche term and

revolving sustainability linked loan facilities, where the proceeds of

the loan will be primarily for refinancing purposes.

This loan marks the first in Asia, from a listed hospitality company,

to incorporate “Sustainability Linked Loan” features, whereby the

interest margin adjusts dependant upon the performance of certain

hotels owned and operated by the company against a pre-

determined set of Sustainability Criteria/Objectives.

The sustainability linked structure is aligned with the Sustainability

Linked Loan Principles (SLP) developed by the Loan Market

Association, the Asia Pacific Loan Market Association and the Loan

Syndications and Trading Association.

10Logos denotes HSBC led transactions

Source: Dealogic as of 23rd November 2021

HSBC – Leading in the Sustainable Bond Space

Lead manager of the Year: Green Bonds – Bank; Green Bond – SSA; Social Bond –SSA; Sustainability Bond –

Bank; Sustainability Bond – Local Authority/ Municipality 2020

Best SSA ESG DealerBest Corporate ESG Dealer

2020

World’s Best Bank for Sustainable Finance2020

Asia’s Best Bank for Sustainable Finance 2019-2020-2021

Most Impressive Bank in Asia Pacific Green/SRI Capital Markets

2018

APAC (ex-Japan) Sustainable Bonds: 2020-2021YTD

*Excluding self-led deals

Rank Bookrunner (Parent) Deal Value USD (m) No. % Share

1 HSBC 13,046 135 6.5

2 Citi 8,868 87 4.5

3 JPMorgan 8,172 67 4.1

4 Standard Chartered Bank 8,049 90 4.0

5 BNP Paribas 7,842 70 3.9

APAC Sustainable Bond Issuance – 2019-2021ytd

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11

Disclaimer

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constitute a commitment to underwrite or purchase or subscribe for all or any portion of the securities mentioned herein. Any such commitment shall be evidenced only by

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