China: Haier Social Infrastructure Leasing

OBJECTIVE

To improve essential social services in the less-developed areas of China through support of Haier’s lease program to relevant firms.

DESCRIPTION

The project will provide funding for social infrastructure investments which improve access to essential social services, including healthcare and education, in rural and less developed areas of China. This will be achieved through AIIB’s investment of up to USD100 million into a social bond program by Haier Financial Services (“Haier Leasing” or the “Company”), who will provide lease finance to relevant firms for the individual social projects.

Haier Leasing is the leasing arm of the Chinese appliance manufacturer Haier Group. This will be the first social bond issued within the Haier Group which specifically targets less-developed regions of China. For the project, Haier Leasing will set up a Social Bond Framework that will govern the selection of eligible social subprojects and which aligns with International Capital Markets Association (ICMA) Social Bond Principles. The Company will also use an ESMS aligned with both the AIIB’s Environmental and Social Framework and International Financial Corporation (IFC) Performance Standards.

IFC will be a parallel investor as well as the Company’s environmental and social (E&S) technical advisor. The project will be the first time IFC and AIIB are supporting social bond issuance by a Chinese nonbanking financial company.

ENVIRONMENTAL AND SOCIAL INFORMATION

The Bank’s Environmental and Social Policy (ESP), including the Environmental and Social Exclusion List (ESEL), applies to this project. The project is categorized FI, as the financing structure involves the on-lending of the proceeds of the bond through financial leasing to social infrastructure subprojects. This will include the selection, appraisal, approval and monitoring of subprojects in accordance with AIIB’s ESP requirements. The E&S instrument will be (i) Haier Leasing’s enhanced ESMS, which is materially consistent with AIIB’s ESP and complemented by (ii) Haier Leasing’s Social Bond Framework aligned to ICMA Social Bond Principles. An overview of the enhanced ESMS is disclosed in both English and Chinese.

The current pipeline comprises to be leased assets used in healthcare, education, agriculture, and manufacturing sectors. Every subproject will be screened by Haier Leasing to identify the risks and following the assessment, appropriate mitigation measures will be adopted. For this social bond issuance, Haier Leasing has agreed to (i) adopt AIIB’s exclusion list; (ii) exclude Higher Risk transactions and (iii) exclude coal mining, coal transportation or coal-fired power plants, as well as infrastructure services exclusively dedicated to support any of these activities.

The relevant Social Bond Framework, second-party opinion, and annual social bond report will be made publicly available. At the corporate level, Haier Group’s annual ESG report, prepared in accordance with Hong Kong Stock Exchange ESG Reporting requirements, is disclosed.

Haier has enhanced its External Communications Mechanism (ECM), including contacts and processes to receive and handle related E&S matters, in both Chinese and English, and aligned with AIIB’s ESP requirements. It will be made available to Project-Affected People and Project contracted workers and will provide information on its ECM and AIIB’s Project-affected People’s Mechanism (PPM). Under its enhanced ESMS, Haier Leasing will require lessees to establish a suitable subproject-level GRM, or equivalent, and inform people timely in the project’s footprint about its availability in an appropriate manner. The GRM will receive and facilitate resolution of the concerns and complaints of people who believe that they have been adversely affected by the project’s E&S impacts.

Haier Leasing will rely on information provided directly by the lessees to conduct Environmental and Social Due Diligence (ESDD), impact evaluation and ongoing monitoring of the subprojects. Haier Leasing will be required to maintain a comprehensive database comprising all relevant E&S information and report to AIIB. AIIB will conduct post-reviews or monitoring of the selection and implementation of other subprojects as part of its regular supervision, comprising engagement with Haier Leasing, potential site visits once conditions allow and detailed review of the E&S documentation of selected subprojects.