Singapore’s United Overseas Bank (UOB) and digital securities exchange ADDX today announced the digitization of a S$50 million (US$37 million) sustainability-linked bond using blockchain and smart contract technology.
Fast facts
- The bond allocation was part of a S$675 million (US$496 million) sustainability-linked bond issued on Sept. 29 by Singapore-based energy provider Sembcorp Industries, through its wholly-owned subsidiary Sembcorp Financial Services (SFS). Sembcorp Industries’ sustainability-linked bond is one of the first issuance by an energy company in Southeast Asia and one of the region’s largest such issuance to date, according to Sembcorp.
- Blockchain and smart contract technologies enable digital bond issuers to automate previously manual processes in bond administration, such as coupon payments and coupon rate adjustments. Digitization can also significantly reduce upfront issuance and administrative costs. In addition, the tokenized nature of the digital bond means it can be offered in fractional sizes to a wider range of investors and allow greater diversification of portfolios because of smaller subscription sizes.
- Sustainability-linked bonds involve issuers setting predefined ESG (environmental, social and governance) targets, with their performance linked to coupon paid to investors. For its sustainability-linked bond, Sembcorp has committed to a sustainability performance target of reducing its greenhouse gas emissions intensity to 0.40 tons of carbon dioxide equivalent per megawatt hour (tCO2e/MWh) or lower by Dec. 31, 2025. If the target is not met, the coupon rate will step up by 0.25 percentage points per annum from the first interest payment date on or after April 1, 2026.
- “The collaboration with ADDX helps our corporate clients such as Sembcorp tap the benefits of digital bond issuance for security, time and cost efficiencies. Such initiatives enable our corporate clients in Singapore and across the region to engage a wider base of investors and enjoy the benefits of asset tokenization,” said Frederick Chin, head of group wholesale banking and markets at UOB, in a statement. “The use of distributed ledger technology (DLT) and asset tokenization has strong potential in radically improving how capital markets can operate in the future and it is important our clients can take advantage of such new technologies.”
See related article: How blockchain can power the growth of green finance