Asia-Pacific trailblazes ESG adoption and innovation amongst global data centre operators

Green finance

From green debt to sustainability-linked loans, data centre operators’ financing approach is evolving to mitigate environmental impact.

A burgeoning yet carbon intensive economy tied to all walks of life

With the sprawling usage of big data and the increasing adoption of digitisation, cloud, AI, 5G across all aspects of our daily life – personal, work and society, data centres are the backbone of our economic, commercial and social existences. In the post-pandemic era, their role is more important than ever, as demand for their services continues to grow aggressively worldwide.

In the real estate sector which contributes almost 40% to global greenhouse gas (GHG) emissions, data centres are one of the world’s most energy-intensive buildings. Accounting for between 2.5% and 3.7% of all GHG emissions, these establishments have even overtaken the aviation and shipping industries. Asia-Pacific, home to the four countries with the largest number of data centres in the world - China, Australia, Japan and India, is the region where the most carbon-intensive structures are based.

To remedy this and in line with the UN Sustainable Development Goals and the Paris Agreement, some major APAC industry players have started adopting more sustainable practices and progressively involving a low-carbon approach in their operations, as illustrated by the following benchmarking financings. This shift is also pivotal for the net-zero transition of organisations that heavily rely on data centre services in order to reduce their scope 3 indirect emissions.

Financing as a means toward net zero

Starting with green loans, this type of debt instrument allows borrowers to use proceeds to fund projects that make a substantial contribution to environmental objective(s), through for example enhancement in power usage and cooling efficiency, adoption of renewable energy sources and usage of sustainable building materials.

In 2022, Crédit Agricole CIB supported the very first data centre green loan in Japan, to finance the TOK2 data centre project in Tokyo developed by the region’s hyperscale data centre specialist, AirTrunk. The deal was the first to use eligibility criteria based on operating power usage effectiveness (PUE) and water productivity, two crucial metrics for evaluating data centre sustainability. In 2023, we also acted as the Green Loan Coordinator for the very first data centre green loan in Korea worth KRW 440 billion (USD 335 million) and financed the first phase of the SEL2 100 MW campus in Seoul built by Digital Edge (Singapore) Holdings Pte. Ltd. in partnership with the leading local developer SK Ecoplant. The project, which is the country’s largest commercial colocation facility, will be one of the most energy-efficient data centres in the South Korean market.

In addition to green loans, industry players have also made sustainability commitments to their corporate strategy to improve their company ESG profile via sustainability-linked loans (SLL), which incentivise borrowers to achieve their sustainability ambitions by incorporating a pricing* adjustments mechanism according to their ESG performance. This type of financial instrument can help drive companies that may not have specific green projects/ capex in the pipeline to make real progress towards sustainability.

Further contributing to AirTrunk’s leadership position in sustainable data centre financing, Crédit Agricole CIB accompanied the conversion of their A$2.1 billion loan into an SLL, then with the A$4.6 billion refinancing of this SLL in August 2023, thus twice establishing the world's largest SLL in data centre history. It set the industry benchmark globally as the first SLL to incorporate all three metrics combining carbon, energy and water usage effectiveness as to achieve the highest level of environmental transparency and accountability for a data centre operator. It was also the first SLL by a data centre operator to incorporate a gender pay equity KPI, and use margin incentives to fund its social impact programs. AirTrunk’s continuous, innovative approach in adopting sustainable financing has set it apart from industry peers, while creating an exemplary precedent as guidance for those who have ambition to follow suit. 

“Our decision to link 100% of our financing to ESG was to provide transparency on our sustainability objectives and to hold ourselves accountable to those objectives with real financial and reporting obligations. By driving innovation in sustainable financing and creating a lasting impact in our communities, we are committed to powering positive industry change. Crédit Agricole CIB has played an integral part in assisting AirTrunk's ESG financing journey. They have supported our environmental and social commitments and we look forward to continuing this partnership to drive further innovation for a more sustainable future.”

Prashant Murthy

AirTrunk Chief Financial and Commercial Officer

“The most recent awards granted to AirTrunk as the ‘Best Debt Finance Deal in Australia and New Zealand’ at FinanceAsia Achievement Awards 2023 and ‘Australian Syndicated Loan Deal of the Year’ at KangaNews Awards 2023 are a fantastic recognition of AirTrunk’s sustainability ambitions and contribution to develop high standards for this sector.”

Christophe Cretot

Head of Corporate & Leveraged Finance APAC

Another transition example is ESR, APAC's largest real asset manager and the world’s third largest listed real estate investment manager, whose strategy integrates ESG into all aspects of its financial management, operations and development, with a total of seven SLLs already signed for around USD4 billion. We recently supported one of them, marking the first brownfield data centre SLL in Hong Kong worth HKD 1.6 billion (USD 204 million), to finance the conversion of a building located in one of the city’s main data centre clusters into a modern and more sustainable structure, with the support of a major local utility provider CLP Power.

Paving the way towards a sustainable digital future

As the digitisation of the economy must go hand in hand with its decarbonisation, Crédit Agricole CIB, whose mission includes financing the new economy in the technology, media and telecoms areas, is committed to guiding the regional data centre sector towards the next level of sustainability by constantly advocating industry actors to embark and progress on a low-carbon roadmap.

As part of its climate strategy and roadmap to net-zero by 2050, the Crédit Agricole Group has set targets for 2030 in 10 sectors representing more than 75% of global GHG emissions, including a 40% reduction in CO2 emissions from its EUR24.6 billion commercial real estate financing portfolio. In line with this ambition, we offer our customers fully integrated advisory services and innovative solutions to help gear them up for the future as the sector continues to embrace ESG developments. As their transition partner, our support and value-add come in various forms, from acting as green loan advisor/coordinator, sustainability advisor/structuring agent on debt instruments, to formulating clients’ sustainability frameworks. We also strive to look for opportunities to set higher benchmarks on sustainable practices for the better good of the industry.

Although data centres still have a long way to go to achieve carbon neutrality, many organisations are already on the right track. These APAC significant strides have successfully propelled the market’s green agenda and would inspire more and more ambitious actions from others, with a view to creating an industry-wide impact that will eventually drive all players notably in Europe and the Americas to join the bandwagon.

“Crédit Agricole CIB is committed to ESG and is among the world’s leaders in structuring and investing in green, social and sustainable financings. By leveraging our strong data centre and sustainable financing expertises, we are dedicated to support our clients across the region in their ESG strategy. We see the rising demand for sustainable financings in the data centre space in APAC coupled with a higher degree of sophistication as a great opportunity for us to support our clients and provide them with solutions and best practices.”

Christophe Cretot

Head of Corporate & Leveraged Finance APAC

*Or other forms of adjustment in the financial characteristics of the financial instrument

**Commercial real estate 2030 Net Zero Banking Alliance target for Credit Agricole S.A.: -40%9 in CO2e emitted per sq. meter per year by corporate customers’ and real estate professional buildings from 46 kgCO2e/m2 to 28 kgCO2e/m2

Source: International Energy Agency, Climatiq Analysis, The Shift Project, OurWorldinData

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