AL RAJHI BANK
Sustainable
Finance Impact
Assessment 2025
For eligible sustainable projects under Al Rajhi Bank's Sustainable Finance Framework
February 2025
CONFIDENTIAL
The Carbon Trust's mission is to
accelerate the move to a decarbonised future.
Authors:
Toby Kwan
Senior Manager, Sustainable Finance
toby.kwan@carbontrust.com
Maria Fernanda Velez
Senior Associate, Sustainable Finance
maria.fernandavelez@carbontrust.com
Harry O'Higgins
Analyst, Finance & Infrastructure
harry.ohiggins@carbontrust.com
Classification: External Confidential
Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025 | |
Contents | |
Introduction | 5 |
Al Rajhi Bank Sustainable Finance Framework Overview | 5 |
Reporting Principles | 6 |
Scope of Calculations and Reporting | 7 |
Avoided Emissions | 7 |
Al Rajhi Bank Avoided Emissions and Attribution | 8 |
Al Rajhi Eligible Sustainable Project Impact Highlights | 9 |
Sector Breakdown of Sustainable Financing Allocation | 10 |
Renewable Energy | 10 |
Solar PV Impact | 10 |
Biofueled Plants Impact | 11 |
Battery Energy Storage Impact | 11 |
Energy Efficiency | 12 |
District Cooling Impact | 12 |
Sustainable Water and Wastewater Management | 12 |
Wastewater Treatment Plants Impact | 13 |
Desalination Plants Impact | 13 |
Affordable Housing | 14 |
Appendix 1: Detailed Results | 15 |
1.1. Summary of the Impact of Al Rajhi's Allocated Eligible Asset Portfolio with a
Year-On-Year Comparison- Total Amount of Operational and Under Construction
Projects | 15 |
1.2. Summary of the Impact of Al Rajhi's Allocated Eligible Asset Portfolio - Total
Amount of Operational Projects | 16 |
1.3. Summary of the Impact of Al Rajhi's Allocated Eligible Asset Portfolio - Total | |
Amount of Under Construction Projects | 17 |
Methodology | 18 |
Renewable Energy | 18 |
Solar PV and Wind Energy Impact Methodology | 19 |
Biofueled Plants Impact Methodology | 19 |
Classification: External Confidential
Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025
Energy Storage Facilities Impact Methodology | 20 |
Energy Efficiency | 21 |
District Cooling Impact Calculation | 22 |
Sustainable Water and Wastewater Management | 22 |
Sewage Treatment Plants Impact Calculation | 23 |
Desalination Plants Impact Calculation | 23 |
Affordable Housing | 24 |
Classification: External Confidential
Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025
Abbreviations
ACU | Air Conditioning Unit |
BESS | Battery Energy Storage Systems |
GBP | Green Bond Principles |
GHG | Greenhouse Gas |
GLP | Green Loan Principles |
ICMA | International Capital Markets Association |
IFI | International Financial Institutions Working Group |
on Greenhouse Gas Accounting | |
KSA | Kingdom of Saudi Arabia |
LMA | Loan Market Association |
LSTA | Loan Syndications and Trading Association |
PCAF | Partnership for Carbon Accounting Financials |
PV | Photovoltaic |
RE | Renewable Energy |
SBG | Sustainability Bond Guidelines |
SBP | Social Bond Principles |
SDG | Sustainable Development Goals |
SLP | Social Loan Principles |
WBCSD | World Business Council for Sustainable |
Development | |
Classification: External Confidential
Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025
Introduction
Al Rajhi Bank Sustainable Finance Framework Overview
Aligned with international and country-specific sustainability initiatives, Al Rajhi Bank ("Al Rajhi" or the "Bank") intends to issue green, social or sustainability bonds, sukuk, loans and other debt instruments ("Sustainable Financing Instruments")1. The Sustainable Financing Instruments will fund Eligible Sustainable Projects that conform to the sustainable finance principles listed below:
- the International Capital Market Association ("ICMA") Green Bond Principles ("GBPs") 2021, Social Bond Principles ("SBPs") 2021and Sustainability Bond Guidelines ("SBGs") 2021; and/or
- the Loan Market Association ("LMA") Green Loan Principles ("GLPs") 2021 and Social Loan Principles ("SLPs") 2021.
The Framework has received a Second Party Opinion from S&P Global Ratings2.
In alignment with the above principles and guidelines, the Bank's Sustainable Finance Framework (the "Framework") is presented through the four core components of the GBPs, SBPs, SBGs, GLPs and SLPs (the "Principles") as well as their recommendation for external review:
- Use of Proceeds;
- Process for Project Evaluation and Selection;
- Management of Proceeds; and
- Reporting.
Bonds and sukuk issued under the Framework may take the form of public transactions or private placements, in bearer or registered format, and may take the form of senior unsecured or subordinated issuances. Such sukuk, bonds, and any loans entered under the Framework will be standard recourse to- the-issuer obligations and investors will not bear the credit risk of the underlying allocated eligible asset exposures. Al Rajhi, at its discretion but in accordance with the principles, will allocate an amount at least equivalent to the net proceeds of the Sustainable Financing Instruments, to finance and/or re- finance, in whole or in part, sustainable projects which meet the eligibility criteria of the Framework ("Eligible Sustainable Projects"). Eligible Sustainable Projects will be recorded in the Sustainable Finance Register (the "Register") and classified under the categories of eligible projects defined in the Framework ("Eligible Sustainable Project Categories").
- Al Rajhi Sustainable Finance Framework
- Al Rajhi Second Party Opinion
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Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025
Eligible Sustainable Project Categories
Sust. Management | Pollution Prevention | |||
Renewable Energy | Energy Efficiency | Green Buildings | ||
and Land Use | and Control | |||
Sustainable Water and | Clean | Affordable Housing | Employment | Access to Essential |
Generation | ||||
Wastewater | Transportation | Services | ||
Management |
Figure 1: Eligible Sustainable Project Categories
Green = eligible environmental category Blue = eligible social category
Reporting Principles
Reporting of the environmental impacts of green bonds is evolving and is a relatively new concept. However, the Carbon Trust is committed to reporting on the method used to calculate the avoided GHG emissions based on:
-
PCAF's The Global GHG Accounting and Reporting Standard for the Financial Industry
(November 2020), Chapter 5.3 Project Finance3, - Climate Bonds Standard V3.04
- IFI GHG Accounting for Grid Connected Renewable Energy Projects (July 2019)5,
- Green Loan Principles (Feb 2021),
- Green Bond Principles, Voluntary Process Guidelines for Issuing Green Bonds (2021)6, and,
- ICMA Harmonised Framework for Impact Reporting (2023)7.
- WBCSD Guidance on Avoided Emissions8
- The Global GHG Accounting and Reporting Standard for the Financial Industry (Dec 2022)
- Climate Bonds Standard V3.0 | Climate Bonds Initiative
- Harmonized IFI Grid Factors 2021
- LSTA Guidance
- Handbook Harmonised framework for impact reporting (June 2023)
- WBCSD Guidance on Avoided Emissions (Mar 2023)
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Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025
Scope of Calculations and Reporting
Al Rajhi intends to report the expected or actual quantitative environmental and/or social impact of the Eligible Sustainable Projects it finances or co-finances through its Sustainable Financing Instruments. The reporting includes the reduction or avoidance of greenhouse gases ("GHGs") estimated to have occurred, attributable to the Eligible Sustainable Projects. Al Rajhi also evaluates other indicators that are appropriate to report for environmental and/or social impact and performance, such as energy generation figures by type of technology and number of beneficiaries of mortgage subsidies.
Al Rajhi undertakes to report the environmental and/or social impact of projects it finances or co- finances through its Sustainable Financing Instruments based, where possible, on the actual environmental and/or social performance of the asset. Where this is not possible, expected performance is used. The reporting includes social indicators, green indicators, and resulting emissions reductions or avoidance, all of which require assumptions and calculations. The reporting is based on the net benefit resulting from the asset in a given period of operation, rather than the gross emissions change before or after the life of the asset or project.
Al Rajhi Bank will allocate an amount at least equivalent to the net proceeds of the Sustainable Financing Instruments issued under the Framework to finance and/or re-finance, in whole or in part, sustainable projects which meet the eligibility criteria of the Eligible Sustainable Project categories, as defined above. A maximum 3-year look-back period would apply for refinanced projects and Al Rajhi Bank expects each issuance under this framework to be fully allocated within 2 years from the date of issuance. The Bank will, where possible, disclose to investors the expected share of financing versus refinancing for any Sustainable Financing Instrument.
In accordance with the principles of reporting described above, Al Rajhi has committed, and continues to commit, to transparent disclosure of any assumptions and estimations used in the calculation of its reporting framework. For clarity, Al Rajhi has engaged the Carbon Trust to assess and estimate the impacts of its Allocated Eligible Sustainable Asset Portfolio, which includes assets classified as Renewable Energy, Energy Efficiency, Sustainable Water Management, and Affordable Housing, only.
Avoided Emissions
Avoided emissions form a core component of the impact assessment. They provide an insight into the wider positive impact in the form of GHG emissions avoided or reduced as a result of the product and/or services, in comparison to a base reference scenario. Existing as a subsection of avoided emissions, this assessment will also consider the enablement from a solution (product/service) and whether that allows for the same or similar function to be performed with significantly less GHG emissions. By providing these solutions, companies enable avoided emissions in the wider system, outside of their value chain. Avoided emissions, along with the entire impact assessment will be calculated on a year-by- year basis.
At the core of the avoided emissions assessment is the reference scenario. This portion of the assessment looks to understand the context of the investment and what is directly being replaced/reduced as a result of the investment. The reference scenario must be a credible alternative to reflect the reality of the region. Where avoided emissions are calculated, the reference scenario will be described in each of the relevant sector methodology sections. This is summarised in the graph and equation below:
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Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025
= ∑ −
200
Emissions (tCO2e)
-50
150
Reference Scenario Emissions | Solution Emissions | Total Avoided Emissions |
Figure 2 - Avoided emissions calculation example
Al Rajhi Bank Avoided Emissions and Attribution
When carrying out the impact assessment, an attribution factor was applied to all assets in line with PCAF's methodology. This factor helps us understand the share of Al Rajhi's exposure and contribution to the impact of the project. In the case of investments made via Al Rajhi's subsidiaries and owned entities, including joint ventures entered into by its subsidiaries, only the issuer's share of the investments will be applicable as an allocation to the eligible projects.
= ×
In the process of considering investments for allocation under the Sustainable Financing Instruments, Al Rajhi will discount the portion of the Eligible Sustainable Projects that have been disbursed by one or several other issuers.
The calculation of the attribution of emissions and avoidance takes the outstanding investment amount and divides it against the total project value. This is summarised in the equation below:
ℎ
=
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CONFIDENTIAL
Al Rajhi Bank Sustainable Finance Impact Assessment, February 2025
Al Rajhi Eligible Sustainable Project Impact Highlights | |||||||
• Out of the 10 projects, 9 are already operational and just 1 is currently under | Total Allocated Sustainable | Number of Eligible Project | |||||
construction. | Financing (USD) | Categories | |||||
7.746 billion | 4 | ||||||
3 solar PV projects | 1 biodiesel | 1 battery energy | 1 district cooling | ||||
have received | powered plant has | storage project has | project received | Operational Attributed | |||
financing with an | received financing | received financing with | financing with an | Number of Eligible Projects | |||
Avoided Emissions (tCO2e) | |||||||
attributed avoided | with an attributed | an attributed avoided | attributed avoided | ||||
10 | |||||||
emissions of 372,595 | avoided emissions | emissions of 4,382 | emissions of 3 | 388,937 | |||
tCO2e. | of 58 tCO2e. | tCO2e. | tCO2e. | ||||
2 sewage treatment | 1 desalination plant | 1 affordable housing | Under Construction | Total Attributed Avoided | |||
Estimated Attributed | |||||||
plant projects have | Emissions (tCO2e) | ||||||
project has received | project has received | Avoided Emissions (tCO2e) | |||||
received financing | financing with an | financing, subsidizing | 388,935 | ||||
1.5* | |||||||
with attributed | attributed avoided | 89,147 beneficiaries. | |||||
wastewater treated of | emissions of 11,899 | ||||||
17,058,429 m3. | tCO2e. | *From District Cooling | |||||
9 |