CIC Sustainable Finance

Certification Scheme (SFCS)

Summary Report

September 2022

Sea Development Limited has confirmed the proceeds will be used for the specified Project Categories that meet the eligibility criteria stated:

Project Categories	Green Building
Eligibility Criteria	BEAM Plus New Buildings V2.0 Gold Rating

Sea Development Limited has confirmed that the selected Project Categories and Eligibility Criteria are in line with the following internationally recognized frameworks across financial markets:

Frameworks

• The International Capital Market Association and Loan Market Association’s Green Loan Principles (GLP) (2021 Edition)

Sea Development Limited has also confirmed the following purposes of the proceeds:

Purpose of financing

• Exclusively used to finance new eligible green projects

Sea Development Limited has identified the below project(s) as eligible green projects which meet the eligible criteria:

Project name	Shek Kong Residential Development Project 石岡住宅發展項目
Location	Lots 1691 RP (Part) and 1691 S.E in D.D. 114 and adjoining Government Land, East of Kam Tin Road, Pat Heung, Yuen Long
Project description	Residential Property Development involving 6 houses
Highlights of green elements and estimated environmental impact	• Reducing annual CO2 emissions by 13% • Reducing peak electricity demand by 10% • 80% of total rated power of appliances are certified energy efficient products • 30% annual fresh water saving • reduction in annual sewage volumes by 20% or more • at least 30% of all timber and composite timber products used are from sustainable sources / recycled timber

Overall Opinion on this section:

Sea Development Limited (“the Applicant”) proposes to obtain a project-level green loan to exclusively finance the new Shek Kong Residential Development Project (“the Project”), which falls into the Green Building project category of the Construction Industry Council Sustainable Finance Certification Scheme (“CIC SFCS” or “the Scheme”), in alignment with the Green Loan Principles (“GLP”) published by the Loan Market Association (“LMA”), Asia Pacific Loan Market Association (“APLMA”) and Loan Syndications & Trading Association (“LSTA”).
The Applicant undertakes to achieve at least the Gold rating of BEAM Plus New Buildings V2.0, which would fulfil the Scheme's technical requirement of achieving at least the 2nd highest grade of a chosen green building assessment tool. In addition to the undertaking letter provided, the Applicant has also provided a BEAM Plus feasibility study report prepared by an external environmental consultant, as well as a signed fee proposal with the environmental consultant regarding the feasibility study, to substantiate that the Project is anticipated to achieve the Gold rating. Although contract specifications are not available to demonstrate the requirement for the Project to achieve the Gold rating of BEAM Plus New Buildings V2.0, the undertaking letter and credit summary report should be sufficient.
According to the BEAM Plus credit summary report, the Project is expected to bring about environmental impacts including: reduction of annual CO2 emissions by 13%, reduction of peak electricity demand by 10%, 80% of total rated power of appliances being certified energy efficient products, annual fresh water saving by 30%, reduction in annual sewage volumes by 20% or more, and at least 30% of all timber and composite timber products used are from sustainable sources / recycled timber.
The Applicant further undertakes in the undertaking letter provided to meet the remaining compulsory requirements for Project Owners in respect of the Green Building project category under the Scheme, namely, to carry out carbon assessment using the CIC Carbon Assessment Tool at the design stage, consider early electrification at the design stage and include site management measures related to carbon reduction in tender / contract documents.
Based on the above, the Scheme’s eligibility criteria for the use of proceeds under the Green Building project category are met, with the environmental impacts clearly defined.

To ensure that the projects financed by the sustainable financing instrument meet the eligible criteria, Sea Development Limited has established an evaluation and selection process with the following key elements:

Evaluation and selection

• Clearly defined environmental sustainability objectives
• Clearly defined process for project evaluation and selection
• Provision of eligibility criteria in line with the standards and technical requirements
• Provision of evidences to substantiate project eligibility according to the technical requirements
• According to the Applicant, the green project loan under consideration will be exclusively used to finance the Project only. The use of proceeds on the Project will be confirmed before the first loan drawdown from the bank. Hence, there would not be the need for further green project evaluation or selection during the term of the loan.

Overall Opinion on this section:

The Applicant has clearly communicated the environmental sustainability objectives of the Project, which was evaluated and selected with a clearly defined eligibility criteria, i.e. to achieve the Gold rating of BEAM Plus New Buildings V2.0.
According to the Applicant, the green project loan under consideration will be exclusively used to finance the Project only. The use of proceeds on the Project will be confirmed before the first loan drawdown from the bank. Hence, there would not be the need for further green project evaluation or selection during the term of this particular loan.
Although the Applicant has not clearly defined the structure, composition and responsibilities of a governance body that oversees the project evaluation and selection process, this requirement should be optional and would not affect the overall compliance of this core component of the GLP.
However, a governance body to oversee the process is suggested. Although the GLP does not explicitly request it, a sound process shall include a clearly defined governance body.

Sea Development Limited has provided information regarding the internal governance process through which the company can track allocation of funds towards green projects. Sea Development Limited will establish a register of funds to contain the following information:

Information

• According to the Applicant, the green project loan is arranged such that loan proceeds will not be transferred to the Applicant’s bank account. Instead, the bank will issue payment checks directly to the counterparties (e.g., service providers and contractors) of the Applicant of the Project. The Applicant would not be able to directly appropriate the funds for uses other than the Project. The Applicant would apply for loan drawdown and allocation of the funds to the Project according to the completion progress of the Project, where a registered architect would certify the payment relating to the drawdown.

Pending the full allocation of the proceeds, Sea Development Limited intends to hold and/or invest the balance of proceeds not yet allocated in accordance with N/A

Overall opinion on this section:

According to the Applicant, the green project loan is arranged such that loan proceeds will not be transferred to the Applicant’s bank account. Instead, the bank will issue payment checks directly to the counterparties (e.g., service providers and contractors) of the Applicant of the Project. The Applicant would not be able to directly appropriate the funds for uses other than the Project. The Applicant would apply for loan drawdown and allocation of the funds to the Project according to the completion progress of the Project, where a registered architect would certify the payment relating to the drawdown.
The aforementioned arrangement of loan proceeds is commonplace for the construction of new buildings. Unlike a lump sum loan, this kind of construction loan is similar to a line of credit. Traceability of the proceeds is ensured and the management of proceeds is appropriate as the funds are dedicated to the prescribed use and managed by the bank.

Sea Development Limited is committed to transparent reporting and will publish Project Progress Report within one year from the date of issuance of each sustainable financing instrument and annually thereafter until the full allocation of the proceeds. The report will consist of information on the allocation of the proceeds and the environmental impacts of the projects.

Allocation Report

• Brief description of the projects

In terms of impact reporting, Sea Development Limited will report on relevant environmental metrics of the projects to which the proceeds have been allocated in line with the technical requirements.

Project Categories	Green Building
Metrics	• Total carbon emissions (permanent works) • Total carbon emissions (temporary works and site impacts)
Methodologies	CIC Carbon Assessment Tool (CAT)
Project Categories	Green Building
Metrics	Percentage of energy use reduced/avoided compared with local baseline or building code.
Methodologies	- Demonstrate performance improvement against the latest edition of Building Energy Code (BEC) - Peak Electricity Demand Reduction - Percentage of energy efficient appliances used
Project Categories	Green Building
Metrics	Percentage of water reduced/avoided compared with local baseline.
Methodologies	Demonstrate the annual water use savings compared with a baseline case based on BEAM Plus standard
Project Categories	Green Building
Metrics	Waste minimised, reused, recycled in percentage of total waste and/or in tonnes p.a.
Methodologies	- Construction Waste Management Plan - Percentage of construction waste recycling

Overall Opinion on this section:

The Applicant undertakes to allocate the loan proceeds to eligible projects and report environmental impacts and social impacts (if applicable) within one year from the date of issuance of each sustainable financing instrument and annually thereafter until the full allocation of the proceeds. The Applicant has also clearly defined the quantitative metrics and methodology of the impact reporting. In particular, the Applicant has further explained that the metric of green roof area is not applicable in its impact reporting, as there is no green roof design in the Project since all roofs of the houses are not accessible.