The need for sustainability-driven management has increased across corporate activities in recent years. Stakeholders, including investors and business partners, are placing greater emphasis on sustainability, prompting many companies to accelerate toward sustainable value creation.
Amid this trend, sustainable finance is gaining traction in global financial markets. Sumitomo Mitsui Banking Corporation (China) Ltd. (SMBCCN) has provided a Sustainability-Linked Syndication Loan (SLL) to Chery Huiyin Motor Finance Service Co., Ltd. (Chery Huiyin), an auto finance solution provider jointly established by Chery Group and regional banks.
Identifying Financial
Needs and Proposing
an SLL
Chery Automobile, a reputable automaker in China, is a globally leading passenger vehicle company headquartered in Wuhu, China. According to the data from the first three quarters of 2024, Chery Automobile is the second-largest independent brand passenger vehicle company in China and the eleventh-largest passenger vehicle company in the world. The company expanded into the electric vehicle (EV) sector in 2009 and has been actively growing its new energy vehicle (NEV) business, including the construction of a dedicated EV manufacturing plant in Qingdao, Shandong Province.
As the financial services arm of Chery Automobile Group, Chery Huiyin provides auto loans, leasing, and dealer financing solutions, playing a key role in supporting the group’s overall sales strategy.
SMBCCN assessed Chery Huiyin’s financing needs to support its efforts in enhancing both environmental and social value. Leveraging its expertise in sustainable finance, SMBCCN proposed an SLL syndication to support the NEV business. This project extended beyond financial support, contributing to both business growth and social value creation.
Qu Lingxiu from SMBCCN’s Investment Banking Dept./ Sustainability Solutions Dept., highlighted the significance of this initiative.“This was Chery Huiyin’s first SLL and also the first case where SMBCCN independently acted as the sole lead arranger and sustainability coordinator for an auto finance company. For us, this project marks an important step in setting new standards in sustainable finance.”
Ambitious Target Setting:
Key to Supporting the
NEV Market and
Local Communities
The key aspect of this project was the establishment of targets. For sustainability-linked finance, SPTs (Sustainability Performance Targets, specific improvement goals tied to key performance indicators) must be ambitious. Setting goals that are too easy may give the impression that the company’s sustainability efforts are superficial, leading to claims of “greenwashing.”
This project focused on three key themes: environmental protection, reducing social inequality, and consumer rights protection. Specific targets were set for each.
First, a challenging SPT was set for the annual growth rate of NEV-related loans, using past figures as a benchmark. This target aligns with China’s environmental policies aimed at promoting NEV adoption and directly supports Chery Huiyin’s business expansion in the sector.
In line with the theme of reducing social inequality, another SPT was set to increase lending to rural areas, promoting financial inclusion. By supporting the purchase of agricultural vehicles and equipment, Chery Huiyin is contributing to regional economic development.
Additionally, an SPT was introduced to promote financial literacy to protect consumer rights. Through seminars held in regional cities and rural areas, Chery Huiyin educates consumers on safe financial service usage, fraud prevention, and consumer rights protection. These also strengthen trust in financial services.
Candy Huixian Lin from SMBCCN’s Corporate Banking Dept. II, who worked alongside Qu to support the client in setting SPTs, emphasized their significance and impact. “These SPTs serve as concrete guidelines that connect the client’s business growth with social value creation. By setting targets across three themes, the initiative not only expands financing for the NEV sector but also promotes rural lending and financial literacy efforts. This framework enables the company to pursue business growth while simultaneously contributing to local communities.”
Building Trust Through
Dialogue to Gain Insight
into the Client’s Business
The project faced several challenges, particularly regarding Chery Huiyin’s corporate information. As a non-listed company, Chery Huiyin’s business model was difficult to fully understand through external sources. Lin reflected on overcoming this challenge, saying, “To deepen our understanding of the business, we carried out extensive on-site visits, conducted industry research, and analyzed competitors. Through ongoing discussions with the client, we were able to build a stronger foundation of trust.”
Setting SPTs required ambitious benchmarks, needing extensive discussions with Chery Huiyin over several months. After more than four months of negotiations, the contract terms and transaction structure were carefully refined, finally leading to a consensus among all parties.
To enhance understanding of sustainable finance, the SMBCCN team provided sustainability and SLL-related insights to Chery Huiyin from the early stages of the project. Additionally, obtaining a Second Party Opinion from the Hong Kong Quality Assurance Agency further strengthened the project’s credibility.
SLL as a Catalyst for
Transformation Toward a
Sustainable Business
Model
Chery Huiyin established its own sustainability governance framework through this project, bringing tangible benefits to both the local community and the environment. Building on the above initiatives, the company is further advancing its sustainable business model by issuing Green Asset-Backed Securities and pursuing additional sustainability-related financing to support environmentally responsible operations.
Lin noted, “One of the key achievements of this project was that the SLL structure served as a catalyst for internal discussions within the client’s organization, encouraging them to formally integrate social responsibility and driving their transformation toward a sustainable business model. Moving forward, SMBCCN will continue to strengthen efforts that promote social value creation and extend this momentum to a broader range of companies.”
Qu emphasized the value of sustainable finance and expressed her determination, saying, “Our role is to create opportunities for companies to reassess their direction and initiate transformative changes. Sustainable finance is an essential element for the future of society. Building on the experience gained from this project, we are fully committed to taking on new challenges ahead.”
