Easy as one, two, three: how finance can help kids

The interest Peabody pays on its sustainability-linked loan depends on achieving childcare qualification training targets for tenants. Here's how it works.


Housing associations in the UK have had a long-standing philanthropic mission going back to the 19th century. In the 21st century, they are looking to draw on the transformative potential of finance, in the form of the sustainability-linked loan, to explore new ways of driving forward their social impact purpose.

Peabody Trust, founded in 1862 and one of London’s oldest and largest housing associations, has partnered with BNP Paribas on a new five-year £75 million sustainability-linked loan.

SLLs are allowing the housing associations to explore new ways of driving forward their social impact purpose

In such loans, the interest rate paid depends on the borrower meeting specified social impact- or sustainability-based key performance indicator targets. For Peabody, if it delivers an agreed number of accredited childcare qualifications for its tenants under its Childcare Training Programme, it will benefit from a lower interest rate on the loan. Its training target increases incrementally over the five-year life of the loan.

Peabody will draw on the loan for general corporate purposes in their mission to provide affordable housing and will reinvest interest savings in the Peabody Community Foundation (PCF). This benefits thousands of Londoners every year, and meets several UN Sustainable Development Goals (SDGs), including:

  • SDG 1: no poverty
  • SDG 8: decent work and economic growth
  • SDG 10: reduced inequality
  • SDG 11: sustainable cities and communities
  • SDG 17: partnerships

The loan is part of BNP Paribas’ programme of responsible investment in the UK social housing sector,. This follows sustainability-linked loans for Optivo and L&Q, which sought to improve employment outcomes for tenants.

David Reynolds, a senior banker at BNP Paribas, has observed significant growth in the role of private finance in the sector. “In the last 12 months, it has evolved to include, for the first time ever, structures linked to social purpose. BNP Paribas has had the privilege of working with three UK housing associations to provide liquidity through individually-tailored SLLs,” he explains. “For us, this is about partnering with housing associations for the long term and supporting their continued drive to improve residents’ and communities’ quality of life, health and wellbeing”.