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Sustainability

Sustainability Linked Finance

Sustainability-linked finance (loans/bonds) is a generic term for loans whose financial and structural characteristics may change depending on the achievement of the company's Sustainability Performance Targets (SPTs), which are targets that are aligned with the company's sustainability strategy.

The Orico Sustainability Linked Finance Framework was developed as a financing tool to promote the resolution of social and environmental issues. This framework will enable us to raise Sustainability Linked Loans or Sustainability Linked Bonds in a flexible manner.

Contributing to the Creation of Sustainable Communities

Orico aims to "contribute to the creation of sustainable communities" as one of its materiality issues. The countries in Southeast Asia where Orico operates are experiencing economic development, an expanding middle class, and rapid motorization. In such regions, we will contribute to the development of the automobile market by developing and providing services optimized for each country.

8 DECENT WORK AND ECONOMIC GROWTH 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE 11 SUSTAINABLE CITIES AND COMMUNITIES

Sustainability Linked Finance

We issued the sustainability-linked bond and loan below under the KPI of an “annual transaction value of auto loans in Southeast Asia (new cars are limited to EVs)” and the Sustainability Performance Target (SPT) of “achieving 81.9 billion yen of the KPI by the fiscal year ending March 31, 2025”. This initiative is considered to contribute to achieving the following goals of SDGs; “8 Decent work and economic growth”, “9 Industry, innovation and infrastructure” and “11 Sustainable cities and communities”.

1.Summary of Sustainability Linked Bonds issued

  • Sustainability Linked Bonds

Issuance number The 33rd Unsecured Corporate Bond
Issue term 5 years
Issue Amount 10 billion yen
Interest Rate 0.839% per annum
Application Period 2023/2/28
Payment Date 2023/3/6
Underwriters Mizuho Securities, Nomura Securities, Daiwa Securities
KPI Annual transaction value of auto loans in Southeast Asia (new cars are limited to EVs)
SPT KPI to be 81.9 billion yen by the fiscal year ending March 31, 2025
Bond Characteristics Endowment (equivalent to 0.1% of total issue amount)*
Rating obtained A+ Japan Credit Rating Agency, Ltd.
A Rating and Investment Information, Inc.
Investment Statement for this Sustainability Linked Bond

  • Investors (in Japanese alphabetical order)

    • Aichi Chita Agricultural Cooperative Association
    • Abukuma Shinkin Bank
    • Ichinoseki Shinkin Bank
    • Ueda Shinkin Bank
    • Ohkawa Shinkin Bank
    • Kagoshima Kogyo Credit Union
    • Akita Bank, Ltd.
    • Toho Bank, Ltd.
    • Kitami Shinkin Bank
    • Kushiro Shinkin Bank
    • The Sawayaka Shinkin Bank
    • Takamatsu Shinkin Bank
    • Choshi Shoko Credit Union
    • Tokio Marine Asset Management Co., Ltd.
    • Nissay Asset Management Corporation
    • Hyogo Shinkin Bank
    • JA Mie Shinren
    • Mitsui Sumitomo Insurance Company, Limited
    • Mitsui Direct General Insurance Company, Limited

Issuance number The 35th Unsecured Corporate Bond
Issue term 3 years
Issue Amount 20 billion yen
Interest Rate 0.340% per annum
Application Period 2023/7/7
Payment Date 2023/7/13
Underwriters Mizuho Securities, Nomura Securities, Daiwa Securities
KPI Annual transaction value of auto loans in Southeast Asia (new cars are limited to EVs)
SPT KPI to be 81.9 billion yen by the year ending March 31, 2025
Characteristics of bonds Donation (equivalent to 0.1% of total issue amount)*
Rating obtained A+ Japan Credit Rating Agency, Ltd.
A Rating and Investment Information, Inc.
Investors (in Japanese alphabetical order)

  • Investors (in Japanese alphabetical order)

    • Asset Management One Co., Ltd.
    • Anan Shinkin Bank
    • Ibaraki Mutsumi Agricultural Cooperative Association
    • Kobe Shinkin Bank
    • Tajima Shinkin Bank
    • Tokio Marine Asset Management Co., Ltd.
    • The Tono Shinkin Bank
    • Nissay Asset Management Corporation
    • Norinchukin Zenkyoren Asset Management Co., Ltd.
    • Mitsui Sumitomo Insurance Company, Limited
    • Sumitomo Mitsui Trust Asset Management
    • Mitsui Direct General Insurance Company, Limited
    • Meiji Yasuda Asset Management Company Ltd.
  • *If the SPT is not achieved, an amount equivalent to 0.10% of the total issuance amount will be donated after the SPT determination date to a publicly recognized corporation or organization that works to create a positive impact on the countries in Southeast Asia where we have a business presence. The recipient of the donation will be selected after the necessary institutional decision and disclosed on the website.

2. Summary of Sustainability Linked Loan Issuances

  • Sustainability Linked Loan

Contract term 5 years
KPI Annual transaction value of auto loans in Southeast Asia (new cars are limited to EVs)
SPT KPI to be 81.9 billion yen by the fiscal year ending March 31, 2025
Loan Characteristics Step-down in borrowing rate when SPT is achieved
Lender

  • October 2022 Contract signed

    • Resona Bank, Limited. 2 billion yen

  • March 2023 Contract concluded

    • Mizuho Bank, Ltd. 29.1 billion yen
    • The Bank of Tokyo-Mitsubishi UFJ, Ltd. 28.9 billion yen
    • Sumitomo Mitsui Trust Bank, Limited 18.4 billion yen
    • Development Bank of Japan Inc. 4.0 billion yen
    • Aozora Bank, Ltd. 3.0 billion yen

  • September 2023 Contract concluded

    • The Dai-ichi Life Insurance Co., Ltd. 6.4 bilion yen
    • Nippon Life Insurance Company 3 bilion yen
    • Meiji Yasuda Life Insurance Company 2.2 bilion yen
  • *As of September 2023, cumulative total of 9 conteacts, 97.1 bilion yen.

Formulation of the Orico Sustainability Linked Finance Framework and Obtainment of a Second Opinion

In concluding the loan agreement, we developed the Orico Sustainability Linked Finance Framework, which includes the following five elements: 1）selection of KPIs, 2）measurement of SPT, 3）loan/bond characteristics, 4）reporting, and 5）verification. Aforementioned 5 elements are stated in a second opinion provided by R&I confirming conformity with the following guidelines: The Sustainability Linked Bond Principles (2020) of the International Capital Markets Association (ICMA), the Sustainability Linked Loan Principles (2021) of the Loan Market Association (LMA), the Sustainability Linked Bond Guidelines 2022 and the Sustainability Linked Loan Guidelines 2022 of the Ministry of the Environment of Japan.

While increasing the volume of auto loans, we will also focus on creating a healthy auto market and aim to provide our value to a wide range of customers through our approach to the market for EVs and charging infrastructure, which is expected to expand in popularity in the future.

  • (i) Provision of suitable credit
  • (ii) Reuse of used vehicles
  • (iii) Creation of a safe and secure used car market
  • (iv) Creation of a business foundation for the spread and expansion of EVs and recharging infrastructure

Reporting

KPI performance

Transaction value of auto loans in Southeast Asia (new cars are limited to EVs)

Unit:bilion

Transaction value
(contract)		 Year ending March, 2023
(result)		 Year ending March, 2024
(result)		 Year ending March, 2025
(result)		 Year ending March, 2025
(SPT)
Thailand Transaction value
(contract)		 59.2
(2.7902)		 - - 70.6
Philippines Transaction value
(contract)		 5.1
(0.2479)		 - - 6.4
Indonesia Transaction value
(contract)		 1.1
(58.3)		 - - 4.9
total Transaction value
(case)		 ㇾ 65.5
(3.0964)		 - - 81.9
SPT achievement decision - - - - -

ㇾ result is obtained with limited assurance.

Year ending March, 2023,results

  • All of the transaction volume in Thailand is for used vehicles (no new EVs are handled).

  • All of the transaction volume in Philippines is for used vehicles (no new EVs are handled).

  • Of the total transaction volume in Indonesia, new car EVs amounted to 0.08 billion yen (21 contracts).

The total volume of auto loans (used and new vehicles) in the three countries was 90 billion yen.

We will disclose annually on our website the status of achieving the KPIs against SPT for the period up to the redemption/repayment of this Sustainability Linked Loan.
All stakeholders will have access to publicly available information on the performance of the KPIs for each fiscal year, which will enable ongoing dialogue with stakeholders.

Verification

The progress of KPIs has been obtained limited assurance from Ernst & Young ShinNihon LLC.

  • *The website showing actual KPI results covered by the assurance has been moved to this page after receipt of an assurance report. No content is changed.

Target Organization

  • Thailand:Orico Auto Leasing (Thailand) Ltd.

  • Philippines:Orico Auto Finance Philippines Inc.

  • Indonesia:PT Orico Balimor Finance

Applicable period

  • Year ending March, 2023 (except for PT Orico Balimor Finance, from January 1, 2022 to December 31, 2022)

Calculation target and calculation method

  • Total auto loan transaction volume in Southeast Asia (Thailand, the Philippines, and Indonesia), a KPI established in accordance with The Orico Sustainability Linked Finance Framework (new vehicles are limited to EVs)

  • Auto loans are calculated based on the volume of new credit extended for the purchase of automobiles (principal + fees).

Sustainability