Project Details
Project
Merchants Capital Social Bond Framework Second-Party Opinion (2022)
Client
Merchants Capital Corporation
Project Type
Social Bond/Loan
Industry Group
Banks
Use of Proceeds
Affordable housing
Location
U.S.
Evaluation Date
Apr 2022
Evaluation Summary
Sustainalytics is of the opinion that the Merchants Capital Social Bond Framework is credible and impactful and aligns with the four core components of the Social Bond Principles 2021. This assessment is based on the following:
USE OF PROCEEDS
The eligible category for the use of proceeds, Affordable Housing, is aligned with those recognized by the Social Bond Principles. Sustainalytics considers that investments in the eligible category are expected to lead to positive social impacts and advance the UN Sustainable Development Goals, specifically SDG 11.
PROJECT EVALUATION / SELECTION
Merchants Bank of Indiana’s internal credit team and Merchants Capital Corporation’s production team were responsible for evaluating the eligible properties. Merchants Capital Corporation has processes in place for environmental and social risk assessment that are applicable to all allocation decisions made under the Framework. Sustainalytics considers this process to be aligned with market practice.
MANAGEMENT OF PROCEEDS
The net proceeds from the issuance will be used solely for the purchase of 14 mortgage loans to refinance a portfolio of eligible affordable housing properties, with no flexibility to reallocate. This is in line with market practice.
REPORTING
Merchants Capital Corporation commits to publish an upfront report for the issuance with information on the specific eligible properties refinanced through the mortgage loans, including the description of the eligible properties, along with key sustainability metrics, such as the number of units affordable to tenants at different area median income thresholds. Given the intent to immediately allocate at the time of issuance to refinance a pre-identified portfolio of eligible properties, Sustainalytics views the allocation and impact reporting as aligned with market practice.