REPORT REVIEW
Al Rajhi Bank
Allocation and Impact Report
Allocation and Impact Report Al Rajhi Bank 5 April 2024
VERIFICATION PARAMETERS
Type(s) of reporting
Relevant standard(s)
Scope of verification
Lifecycle
Validity
- Allocation and Impact Report
- Harmonised Framework for Impact Reporting (HFIR), updated June 2023, as administered by the International Capital Market Association (ICMA)
- Harmonised Framework for Impact Reporting for Social Bonds (HFIRSB), updated June 2023, administered by the International Capital Market Association (ICMA)
- Al Rajhi Bank's Allocation and Impact Report 2024 (as of April 2, 2024)
- Al Rajhi Bank's Sustainable Finance Framework (as of February 16, 2022)
-
Sukuk identification: XS2607535684 / April 5, 2028 (USD
1,000 million); Commodity Murabaha Facility identification: Tranche A, FIGI: BBG019RJB997, Tranche B, FIGI: BBG019RJB9G9 / September 15, 2025 (USD 1,265 million); Syndicated Loan Facility identification: Tranche A, FIGI: BBG01J63N2Y7, Tranche B, FIGI: BBG01J63N2Z6 / August 25, 2026 (USD 1,430 million) - Post-issuanceverification
- As long as no changes are undertaken by the Issuer to its Allocation and Impact Report (as of April 2, 2024)
© 2023 | Institutional Shareholder Services and/or its affiliates
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Sustainable Finance Report Al Rajhi Bank
C O N T E N T S
PART I: ALIGNMENT WITH COMMITMENTS SET FORTH IN THE SUSTAINABLE FINANCE | |
PART II: ASSESSMENT AGAINST THE ICMA HARMONIZED FRAMEWORK FOR IMPACT | |
PART III: DISCLOSURE OF PROCEEDS ALLOCATION AND SOUNDNESS OF THE IMPACT | |
REPORTING INDICATORS | 14 |
ANNEX 1: Methodology | 19 |
ANNEX 2: Quality management processes | 20 |
About this Report Review | 21 |
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SCOPE OF WORK
Al Rajhi Bank ("the Issuer", "the Bank" or "Al Rajhi") commissioned ISS-Corporate to provide a Report Review1 on its Allocation and Impact Report by assessing:
- The alignment of the Al Rajhi Bank's Allocation and Impact Report 2024 with the commitments set forth in Al Rajhi Bank Sustainable Finance Framework (as of February 16, 2022)2.
- Al Rajhi Bank's Allocation and Impact Report - benchmarked against Harmonised Framework for Impact Reporting (HFIR), updated June 2023, and Harmonised Framework for Impact Reporting for Social Bonds, updated June 2022, as administered by the International Capital Market Association (ICMA).
- The disclosure of proceeds allocation and soundness of reporting indicators - whether the impact metrics align with best market practices and are relevant to the Sustainable Financing Instruments issued.
-
A limited or reasonable assurance is not provided on the information presented in Al Rajhi Bank's Allocation and Impact Report 2024. A review of the use of proceeds' allocation and impact reporting is solely conducted against ICMA's Standards (Green
Bond Principles, Green Loan Principles, Sustainable Bond Guidelines) core principles and recommendations where applicable, and the criteria outlined in the underlying Framework. The assessment is solely based on the information provided in the allocation and impact reporting. The Issuer is responsible for the preparation of the report including the application of methods and internal control procedures designed to ensure that the subject matter information is free from material misstatement. - The Framework was assessed as aligned with the Green Bond Principles, Social Bond Principles, and Sustainable Bond Guidelines, as of February 16, 2022.
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ASSESSMENT SUMMARY
REVIEW
SECTION
SUMMARY
EVALUATION
Part 1 | The Al Rajhi Bank's Allocation and Impact Report 2024 | ||
Alignment with | meets the Issuer's commitments set forth in the | ||
Sustainable Finance Framework. The proceeds have | |||
the Issuer's | been used to (re)finance Renewable Energy, Energy | ||
commitments | Efficiency, Sustainable Water and Wastewater | ||
set forth in the | Management, and Affordable Housing, in accordance | ||
Framework | with the eligibility criteria defined in the Framework. | ||
Part 2 | The Allocation and Impact Report is in line with ICMA's | ||
Alignment with | HFIR and HFIRSB. The Issuer follows core principles, | ||
except for reporting the Use of Proceeds allocation for | |||
the (HFIR) and | the Commodity Murabaha Facility which occurred after | ||
(HFIRSB) | one year and six months, and where applicable key | ||
recommendations. | |||
Part 3 | The allocation of the sukuk's and loans' proceeds has | ||
Disclosure of | been disclosed, with a detailed breakdown across | ||
different eligible projects as proposed in the Framework. | |||
proceeds | |||
allocation and | The Al Rajhi Bank's Allocation and Impact Report 2024 | ||
soundness of | has adopted an appropriate methodology to report the | ||
reporting | impact generated by providing comprehensive | ||
indicators | disclosure on data sourcing, calculation methodologies, | ||
and granularity reflecting best market practices. | |||
Aligned
Aligned
except for
reporting on
an annual
basis3
Positive
3 The Issuer has reported 18 months after issuing the Commodity Murabaha Facility.
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REPORT REVIEW ASSESSMENT
PART I: ALIGNMENT WITH COMMITMENTS SET FORTH IN THE SUSTAINABLE FINANCE FRAMEWORK
The following table evaluates the Allocation and Impact Report 2024 against the commitments set forth in Al Rajhi Bank's Framework, which are based on the core requirements of the Green Bond Principles (GBP), Social Bond Principles (SBP), and Sustainability Bond Guidelines (SBG) as well as best market practices.
GBP, SBP, SBG | OPINION | ALIGNMENT | ||||||||
WITH | ||||||||||
COMMITME | ||||||||||
NT | ||||||||||
1. | Use of | Al Rajhi Bank confirms to follow the Use of Proceeds' | ||||||||
description provided by Al Rajhi Bank's Sustainable | ||||||||||
Proceeds | ||||||||||
Finance Framework. The report is in line with the initial | ||||||||||
commitments set in the Al Rajhi Bank's Sustainable | ||||||||||
Finance Framework, the proceeds have been used to | ||||||||||
(re)finance projects in the following green and social | ||||||||||
categories: Renewable Energy, Energy Efficiency, | ||||||||||
Sustainable Water and Wastewater Management, and | ||||||||||
Affordable Housing. | ||||||||||
The Issuer's green and social categories align with the | ||||||||||
project categories and are in accordance with the | ||||||||||
eligibility criteria set in the Al Rajhi Bank's Sustainable | ||||||||||
Finance Framework. Environmental and social benefits | ||||||||||
at the category level are described and quantified. | ||||||||||
The Issuer provides an exclusion list of harmful project | ||||||||||
categories, in line with best market practices. | ||||||||||
2. | Process for | Al Rajhi Bank confirms to follow the Process for Project | ||||||||
Evaluation and Selection description provided by Al | ||||||||||
Project | ||||||||||
Rajhi Bank's Sustainable Finance Framework. The | ||||||||||
Evaluation | ||||||||||
report is in line with the initial commitments set in the | ||||||||||
and Selection | ||||||||||
Al Rajhi Bank's Sustainable Finance Framework: A | ||||||||||
Sustainable Finance Working Group ensures the | ||||||||||
respect of the Framework and oversees the evaluation | ||||||||||
and selection process, and the management of the | ||||||||||
proceeds. | Representatives of | the | following | |||||||
departments | are on the working | group: | Finance, | |||||||
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Corporate Social Responsibility, Treasury, Risk, | |||||||
Corporate, and Retail. | |||||||
The projects selected are defined and structured in a | |||||||
congruous manner. The Issuer ensures compliance | |||||||
with the Eligibility Criteria. ESG risks associated with | |||||||
the project categories are identified and managed | |||||||
through an appropriate process. | |||||||
In the context of the project selection and evaluation, | |||||||
Al Rajhi Bank defines and confirms the responsibilities | |||||||
and the various stakeholders involved in the process. | |||||||
3. | Management | Al Rajhi Bank confirms to follow the Process for | |||||
Management of Proceeds description provided by Al | |||||||
of Proceeds | |||||||
Rajhi Bank's Sustainable Finance Framework. The | |||||||
report is in line with the initial commitments set in the | |||||||
Al Rajhi Bank's Sustainable Finance Framework: the | |||||||
proceeds are deposited in general funding accounts | |||||||
and managed through the Sustainable Finance | |||||||
Register. | |||||||
The proceeds allocated to eligible projects represent | |||||||
100% of the amount collected, with no exceptions. The | |||||||
proceeds are tracked in an appropriate manner and | |||||||
attested in a formal internal process. Moreover, the | |||||||
Issuer discloses the temporary investment instruments | |||||||
for unallocated proceeds. | |||||||
4. | Reporting | The Al Rajhi Bank Allocation and Impact Report 2024 | |||||
is coherent with the Reporting description provided by | |||||||
Al Rajhi Bank's Sustainable Finance Framework. The | |||||||
report is in line with the initial commitments set in the | |||||||
Al Rajhi Bank's Sustainable Finance Framework. | |||||||
The sections "Allocation reporting" and "Impact | |||||||
Reporting" of the Allocation and Impact Report | |||||||
comply with the pre-issuance commitment expressed | |||||||
in the Framework. The report is intended to be publicly | |||||||
available. | |||||||
Further analysis of this section is available in Part III of | |||||||
this report. | |||||||
5. | Verification | The Al Rajhi Bank's Sustainable Finance Framework has received a | |||||
Second Party Opinion (SPO). | |||||||
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PART II: ASSESSMENT AGAINST THE ICMA HARMONIZED FRAMEWORK FOR IMPACT REPORTING (HFIR) AND HARMONIZED FRAMEWORK
FOR GREEN BONDS
Reporting is a core component of the Green Bond Principles and transparency is of particular value in communicating the expected and/or achieved impact of projects in the form of an annual report. Green bond Issuers are required to report on both the use of green bond proceeds, as well as the environmental impacts at least on an annual basis until full allocation or maturity of the bond. The Harmonized Framework for Impact Reporting (HFIR) has been chosen as a benchmark for this analysis as it represents the most widely adopted standard.
The table below evaluates Al Rajhi Bank's Allocation and Impact Report against ICMA HFIR.
CORE PRINCIPLES
ICMA HFIR | ALLOCATION AND IMPACT REPORT | ASSESSMENT | |||||||
100% of the proceeds have been allocated, out | |||||||||
of which 16% (USD 580 million) were allocated | |||||||||
to Green Assets. The report will be available on | |||||||||
Al Rajhi Bank's website. | |||||||||
For Commodity Murabaha Facility (FIGI: | |||||||||
BBG019RJB997, FIGI: BBG019RJB9G9, USD 1,265 | |||||||||
Reporting on an | million), the use of proceeds allocation reporting | | |||||||
annual basis | occurred after one year and six months from the | ||||||||
issuance. | |||||||||
For Sukuk (ISIN: XS2607535684, USD 1000 | |||||||||
million) and Syndicated Loan Facility, (FIGI: | |||||||||
BBG01J63N2Y7, FIGI: BBG01J63N2Z6, USD 1,430 | |||||||||
million), the use of proceeds allocation reporting | |||||||||
occurred within one year from the issuance. | |||||||||
The assessment and measurement of the | |||||||||
impacts generated by Al Rajhi Sustainable | |||||||||
Finance Instruments linked with the green | |||||||||
Illustrating the | activities covered the following areas: | ||||||||
environmental impacts | Renewable Energy | ||||||||
or outcomes | |||||||||
▪ | Attributable capacity (MW) | ||||||||
▪ | Annual Production (MWh) | ||||||||
▪ Annual Avoided Emissions (tCO2e) | |||||||||
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- Attributable Electric Capacity (MWe)
- Annual Energy Savings (MWh)
Energy Efficiency
- Annual Energy Savings (kWh)
- Annual Avoided Emissions (tCO2e)
Sustainable Water Management
- Annual Water Collected (m3)
- Annual Water Treated (m3)
- Annual Absolute Energy Reduction (MWh)
- Annual Avoided Emissions (tCO2e)
Al Rajhi's project categories were reviewed in an | |||||||
internal process of environmental | risk | ||||||
ESG Risk Management | assessment as part of its Credit Assessment. The | ||||||
Bank has respected its ESG risk management | |||||||
process in line with its framework. | |||||||
Allocation of proceeds | Allocated proceeds have been reported | in a | |||||
- Transparency on the | single currency (USD).4 | ||||||
currency | |||||||
RECOMMENDATIONS | |||||||
ICMA HFIR | SUSTAINABLE FINANCE REPORT | ASSESSMENT | |||||
Define and | 16% of the proceeds has been allocated to | ||||||
disclose period | Green Assets. No modification (removal or | ||||||
and process for | additional projects) of the portfolio is planned. | ||||||
Project Evaluation | The Issuer followed a transparent process for the | ||||||
and Selection | |||||||
selection and evaluation of Eligible Green | |||||||
Projects. Projects financed and/or refinanced | |||||||
through the Sustainable Financing Instruments | |||||||
issued under the Sustainable Finance | |||||||
Framework were evaluated and selected based | |||||||
on compliance with the Eligibility Criteria as laid | |||||||
out in the Framework. | |||||||
4 For the calculation of the impacts reported for the social categories, the Issuer has used SAR to determine the average loan amount.
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Disclose total | A total of USD 3,695 million has been raised | ||||||||
amount of | through the Issuer's Sustainable Financing | ||||||||
proceeds allocated | Instruments. 16% (USD 580 million) of the | ||||||||
to eligible | proceeds have been allocated to Green Assets. | ||||||||
disbursements | |||||||||
Formal internal | The Issuer followed a transparent process for the | ||||||||
process for the | allocation of proceeds, as defined in its | ||||||||
allocation of | Sustainable Finance Framework. | ||||||||
proceeds and to | |||||||||
report on the | |||||||||
allocation of | |||||||||
proceeds | |||||||||
Report at project | The Allocation and Impact Report includes the | ||||||||
total amount of proceeds allocated per eligible | |||||||||
or portfolio level | |||||||||
project category. | |||||||||
Describe the | The Issuer identifies the project categories and | ||||||||
approach to | clearly defines the total amount of proceeds | ||||||||
impact reporting | allocated at the project category level. | ||||||||
Report the | |||||||||
estimated lifetime | There is no reporting on the estimated lifetime | - | |||||||
results and/or | |||||||||
impacts and project economic life in years. | |||||||||
project economic | |||||||||
life (in years) | |||||||||
Ex-post | The | Issuer currently does not have ex-post | - | ||||||
verification of | |||||||||
verifications for its projects. | |||||||||
specific projects | |||||||||
Al Rajhi reports on the following indicators: | |||||||||
Renewable Energy | |||||||||
▪ | Attributable capacity (MW) | ||||||||
▪ | Annual Production (MWh) | ||||||||
Report on at least | |||||||||
▪ Annual Avoided Emissions (tCO2e) | |||||||||
a limited number | |||||||||
▪ Attributable Electric Capacity (MWe) | |||||||||
of sector-specific | |||||||||
▪ Annual Energy Savings (MWh) | |||||||||
core indicators | |||||||||
Energy Efficiency | |||||||||
▪ Annual Energy Savings (kWh) | |||||||||
▪ Annual Avoided Emissions (tCO2e) | |||||||||
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Sustainable Water Management | ||||||
▪ Annual Water Collected (m3) | ||||||
▪ Annual Water Treated (m3) | ||||||
If there is no | For those indicators where there is no single | |||||
single commonly- | ||||||
commonly used standard, the Issuer has elected | ||||||
used standard, | ||||||
reasonable and easy-to-quantify measurement | ||||||
Issuers may follow | ||||||
units and methodologies. The methodology | ||||||
and disclose their | ||||||
used to calculate the impact indicators is | ||||||
own calculation | ||||||
available on the Issuer's website. | ||||||
methodologies | ||||||
Disclosure on the | The Issuer elects to convert units reported for | |||||
individual projects based on a standard | ||||||
conversion | ||||||
conversion factor and includes appropriate | ||||||
approach (if | ||||||
disclosure of the conversion approach in the | ||||||
applicable) | ||||||
report. | ||||||
Projects with | All projects are 100% eligible for financing. | |||||
partial eligibility | ||||||
When the | ||||||
expected impacts | ||||||
of different project | ||||||
components may | The impact of Al Rajhi's projects is reported | |||||
not be reported | ||||||
separately per category and subcategory on an | ||||||
separately, Issuers | ||||||
aggregated basis. | ||||||
may use (and | ||||||
disclose) the | ||||||
attribution | ||||||
approach | ||||||
OPINION
Al Rajhi follows ICMA's Harmonized Framework for Impact Reporting (HFIR)'s core principles and key recommendations, with an exception as the Use of Proceeds allocation reporting for the Commodity Murabaha Facility (FIGI: BBG019RJB997, FIGI: BBG019RJB9G9) occurred after one year and six months. The Issuer provides transparency on the level of expected reporting as well as on the frequency, scope, and duration, aligned with best practices. The Issuer has disclosed the amount of proceeds allocated, sector-specific core indicators, and calculation methodology in line with the recommendations of the HFIR.
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Al Rajhi Banking & Investment Corporation SJSC published this content on 22 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 April 2024 12:29:06 UTC.