Sun Life Financial Inc.
Type of Engagement: Annual Review
Date: 24 April 2023
Engagement Team:
Akshay Chandrakapure,akshay.chandrakapure@morningstar.com
Nachiket Goli,nachiket.goli@morningstar.com
Introduction
In 2019 and 2023, Sun Life Financial Inc. ("Sun Life") issued two sustainability bonds (the "2019 Sustainability Bond") and (the "2023 Sustainability Bond"), collectively (the "Sustainability Bonds") to finance or refinance a variety of green and socially impactful projects. In 2024, Sun Life engaged Sustainalytics to review the projects financed with proceeds from the Sustainability Bonds (the "Nominated Projects"), and provide an assessment as to whether the projects meet the use of proceeds criteria and the reporting commitments outlined in the Sun Life Sustainability Bond Framework (the "Framework").1 Sustainalytics provided a Second-Party Opinion on the Framework in March 2019.2 This is Sustainalytics' fifth annual review of allocation and reporting of the instruments issued under the Framework, following a previous review in March 2020, March 2021, March 2022,3 and March 2023.4
Evaluation Criteria
Sustainalytics evaluated the Nominated Projects based on whether they:
- Meet the use of proceeds and eligibility criteria defined in the Framework; and
- Reported on at least one key performance indicator (KPI) for each use of proceeds category defined in the Framework.
Table 1: Use of Proceeds Categories, Eligibility Criteria and Associated KPIs
Use of Proceeds | Eligibility Criteria | Key Performance | |||
Category | Indicators5 | ||||
Investments in facilities and equipment dedicated to | |||||
generation, transmission and distribution of energy from | |||||
renewable sources, including: | |||||
i. | Wind | ||||
ii. | Solar | Renewable energy | |||
iii. | Geothermal | ||||
Renewable Energy | capacity installed | ||||
(MW) | |||||
iv. | Hydro (run of river, small scale <25MW, | ||||
upgrades of existing facilities or other hydro | |||||
facilities subject to an ESG assessment)6 | |||||
v. | Biomass (waste or other non-food feedstock | ||||
that does not deplete existing terrestrial carbon | |||||
pools) | |||||
1 Sun Life, "Sustainability Bond Framework", (2019), at:
https://cdn.sunlife.com/static/Global/Investors/Sun_Life_Sustainability_Bond_Framework_March_2019_FINAL-s.pdf
- Sustainalytics, "Second-Party Opinion, Sun Life", (2019), at: https://mstar-sustops-cdn-mainwebsite-s3.s3.amazonaws.com/docs/default-source/spos/sun-life-financial-sustainability-bond-second-party-opinion-03272019.pdf?sfvrsn=cfb16074_3
- Sustainalytics, "Annual Review", (2022), at:https://www.sunlife.com/content/dam/sunlife/regional/global-marketing/documents/com/sustainability-bond-second-party-review-report-2021-e.pdf
- Sustainalytics, "Annual Review", (2023), at:https://mstar-sustops-cdn-mainwebsite-s3.s3.amazonaws.com/docs/default-source/spos/sun-life-financial-inc.-sustainability-bond-annual-review-2023.pdf?sfvrsn=f2162a8e_1
- Sustainalytics notes that the choice of environmental and social impact metrics was guided by the Harmonized Framework for Impact Reporting published by the International Capital Market Association.
- To determine if other hydroelectricity facilities > 25 MW constitute an Eligible Asset, Sun Life will assess the investment relative to Sun Life's Environmental, Social and Governance ("ESG") framework. This ESG assessment will include the location, size and any other relevant environmental and social risk factors related to the hydroelectricity facility. Sun Life's ESG assessment will be subject to review by a qualified third party.
© Sustainalytics 2024
Annual Review
Sun Life Financial Inc.
Investments in facilities and equipment that reduce | ||||
energy consumption or improve the efficiency of | ||||
resources, including: | i. | Tonnes of | ||
i. | Installation of energy efficient heating, | greenhouse | ||
ventilation, air conditioning, refrigeration, | gas (GHG) | |||
lighting and electrical equipment | emissions | |||
ii. | Systems for capture and recycling of waste | reduced/avoi | ||
ded annually | ||||
Energy Efficiency | heat such as district heating and heat recovery | (measured in | ||
iii. | Projects that improve efficiency in the delivery | tonnes of CO2 | ||
equivalent) | ||||
of bulk energy services such as energy storage, | ||||
smart grids, demand response | ii. | Annual | ||
iv. | Projects that enable monitoring and | energy | ||
savings | ||||
optimization of the amount and timing of | ||||
(MBtu) | ||||
energy consumption such as smart meters, | ||||
load control systems, sensors or building | ||||
information systems | ||||
Investments in new or existing commercial or residential | ||||
buildings that have received, or expect to receive based | ||||
on its design, construction and operational plans, | ||||
certification according to third party verified green | Green Building | |||
Green Buildings | building standards, or energy ratings such as: | |||
Certifications | ||||
i. | LEED: Platinum or Gold | |||
ii. | Other equivalent certification schemes, such as | |||
BOMA BEST, ENERGY STAR | ||||
Investments in sustainable and efficient transit | ||||
infrastructure including: | ||||
Clean | i. | Rolling stock, infrastructure and vehicles for | Expected | |
fully electric or non-motorized public transport | vehicles/year | |||
Transportation | ||||
ii. | Infrastructure dedicated to mass public | |||
transportation | ||||
Investments in facilities and equipment that enhance | i. | Number of | ||
care beds | ||||
access to public, not-for-profit, free or subsidized | ||||
added | ||||
essential services including: | ||||
i. | Infrastructure for hospitals, laboratories, | ii. | Number of | |
Access to Essential | shelter | |||
clinics, healthcare, childcare and elder care | ||||
apartments | ||||
Services | centers | |||
added | ||||
ii. | Infrastructure for the provision of child, youth | iii. | Number of | |
or adult education and vocational training | ||||
shelter beds | ||||
services | ||||
added | ||||
Issuer's Responsibility
Sun Life is responsible for providing accurate information and documentation relating to the details of the funded projects, including descriptions of projects, amounts allocated and project impact.
Independence and Quality Control
Sustainalytics, a leading provider of ESG research and ratings, conducted the verification of the use of proceeds from the Sustainability Bonds. The work undertaken as part of this engagement included collection of documentation from Sun Life and review of said documentation to assess conformance with the Framework.
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Sustainalytics relied on the information and the facts presented by Sun Life. Sustainalytics is not responsible nor shall it be held liable for any inaccuracies in the opinions, findings or conclusions herein due to incorrect or incomplete data provided by Sun Life.
Sustainalytics made all efforts to ensure the highest quality and rigor during its assessment process and enlisted its Sustainability Bonds Review Committee to provide oversight of the review.
Conclusion
Based on the limited assurance procedures conducted,7 nothing has come to Sustainalytics' attention that causes us to believe that, in all material respects, the reviewed projects do not conform with the use of proceeds criteria and reporting commitments in the Framework. Sun Life has disclosed to Sustainalytics that the proceeds from the Sustainability Bonds were fully allocated as of December 2023.
Detailed Findings
Table 2: Detailed Findings
Framework | Procedure Performed | Factual Findings | Error or |
Requirements | Exceptions | ||
Identified | |||
Use of | Verification of the Nominated Projects to | All projects reviewed | |
determine alignment with the use of | |||
complied with the use | None | ||
Proceeds | proceeds criteria outlined in the | ||
of proceeds criteria. | |||
Criteria | Framework. | ||
Verification of the Nominated Projects to | All projects reviewed | ||
Reporting | reported on at least | ||
determine if impact was reported in line | None | ||
one KPI per use of | |||
Criteria | with the KPIs outlined in the Framework. | ||
proceeds category. | |||
7 Sustainalytics' limited assurance process includes reviewing documentation relating to details of projects, as provided by the issuing entity, which is responsible for providing accurate information. These may include descriptions of projects, estimated and realized costs, and reported impact. Sustainalytics has not conducted on-site visits to projects.
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Appendix
In 2019, Sun Life issued the 2019 Sustainability Bond and raised CAD 750 million, of which 61% of the proceeds were used to refinance existing projects and 39% to finance new projects.
Table 3: Allocation and Reported Impact from the 2019 Sustainability Bond
Net | Percentage | ||||
Use of | Proceeds | ||||
Reported Impact | Reported | of Net | |||
Proceeds | Project Description | Allocation | |||
Metric | Impact | Proceeds | |||
Category | (CAD | ||||
Allocated | |||||
million) | |||||
Renewable | Financing a wind farm | Renewable energy | 53 MW | 133 | 18% |
Energy | located in Quebec | capacity installed | |||
Energy improvements to | Annual energy | 168,443 | |||
a major public library | 70 | 9% | |||
savings | MBtu | ||||
building in the US | |||||
Energy | |||||
Efficiency | Energy efficiency | Annual GHG | |||
emissions | 9,470 | ||||
improvement for public | 18 | 2% | |||
reduced or | t/CO2e | ||||
school systems in US | |||||
avoided | |||||
Investment in office | Green buidling | LEED Gold | 308 | 41% | |
Green | tower located in Canada | certification | |||
Buildings | |||||
Investment in office | Green buidling | LEED | 139 | 19% | |
development in Canada | certification | Platinum | |||
Financing the | |||||
construction of | Available patient | 128 | 69 | 9% | |
behavioral health center | beds | ||||
Access to | |||||
in New York city. | |||||
Essential | |||||
Services | Providing temporary | ||||
emergency shelter for | Available shelter | 37 | 13 | 2% | |
families experiencing | apartments | ||||
homelessness | |||||
Total Net Proceeds Allocated (CAD million) | 750 | 100 | |||
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In 2023, Sun Life issued the 2023 Sustainability Bond and raised CAD 500 million, of which 33% of the proceeds were used to refinance existing projects and 67% to finance new projects.
Table 4: Allocation and Reported Impact from the 2023 Sustainability Bond
Net | Percentage | ||||
Use of | Proceeds | ||||
Reported | Reported | of Net | |||
Proceeds | Project Description | Allocation | |||
Impact Metric | Impact8 | Proceeds | |||
Category | (CAD | ||||
Allocated | |||||
million) | |||||
Wind farm | Renewable | 22 | 4% | ||
Renewable | energy | ||||
Hydroelectric facility | 41 MW | 31 | 6% | ||
Energy | capacity | ||||
Hydroelectric facility | installed | 26 | 5% | ||
Installation of energy | |||||
conservation | Annual energy | 13,957 MMBtu* | 26 | 5% | |
measures at U.S EPA | savings | ||||
Energy | lab. | ||||
Efficiency | |||||
Installation of energy | Annual GHG | ||||
conservation | emissions | 1,079 t/CO2e* | 27 | 5% | |
measures at U.S | reduced or | ||||
agency headquarters. | avoided | ||||
Investment in | Green buidling | ||||
industrial building in | LEED Gold* | 35 | 7% | ||
Green | certification | ||||
Canada. | |||||
Buildings | |||||
Investment in retail | Green buidling | BOMA Best | 73 | 15% | |
Mall in Canada | certification | Platinum | |||
Clean | Investment in transit | Passenger | |||
project for a new | |||||
Transportati | vehicles off the | 78 per year* | 61 | 12% | |
subway line in | |||||
on | road | ||||
Canada | |||||
Financing a 256-bed | Long-term care | ||||
long-term care home | 203* | 87 | 18% | ||
beds | |||||
in Canada | |||||
Providing financing | Available | ||||
Access to | for a family | shelter | 30 | 14 | 3% |
Essential | emergency shelter. | apartments | |||
Services | |||||
Financing a 200-bed | |||||
intake shelter for | Available | ||||
single women and a | 227* | 98 | 20% | ||
shelter beds | |||||
200-bed shelter for | |||||
homeless in US | |||||
Total Net Proceeds Allocated (CAD million) | 500 | 100% | |||
8 Projects with an * denote those that are under development and thus the impact is projected.
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Disclaimer
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Sun Life Financial Inc. published this content on 03 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 May 2024 19:58:08 UTC.