Landmark Sustainability-Linked Bond drives decarbonisation of social housing

Sustainable finance is driving social and environmental impact for UK housing association L&Q.

Housing association L&Q is at the forefront of decarbonising social housing in the UK, issuing a £300 million Sustainability-Linked Bond (SLB) directly linked to a set of ambitious environmental and social targets. These include L&Q achieving a reduction in scope 1 (direct) and scope 2 (indirect) carbon emissions and energy efficiency improvements across its residential housing portfolio, as well as a building 8,000 new homes, 50% of which are affordable.

The 10-year SLB is the first of its kind in the social housing sector, and is issued under L&Q’s Sustainable Finance Framework, launched last September. The SLB supports L&Q’s progress towards its ambition to be a net-zero carbon business by 2050.

The UK’s stock of residential housing accounts for more than a fifth of the country’s total carbon emissions. The decarbonisation of housing will be critical to achieving the UK’s target of net-zero by 2050, and sustainable finance has an increasingly important part to play.

“This successful issuance demonstrates the strength of our investor relationships, and the confidence they have in our strategy, our governance and ability to adapt,” says Waqar Ahmed, L&Q Group Director of Finance. “With the support of our investors, L&Q will continue to deliver programmes that tackle climate change, save residents money, combat fuel poverty, boost the economy and create jobs.”

In 2018, L&Q secured a landmark £100 million positive incentive loan from BNP Paribas, enabling L&Q to benefit from a discount on the margin of the loan by getting at least 600 residents back to work in the first year and 25 more every subsequent year.

“L&Q is proving that finance can be used to align social and environmental targets and drive real progress in a transparent, measurable, way. L&Q’s communities benefit from new and affordable homes constructed with a lower environmental impact, and investors get a direct link between their investments and the SLB commitments,” says Agnes Gourc, Head of Sustainable Capital Markets, BNP Paribas.

Pioneering sustainable finance in the UK social housing sector

BNP Paribas has led the way in helping housing associations to access innovative financing solutions aligned with sustainability objectives, completing a number of Sustainability-Linked Loans (SLLs) over the past three years.

  • July 2019: a £75m five-year Sustainability-Linked Loan (SLL) for Optivo, linked to helping its residents in  employment or work-ready training,
  • August 2019: a £75m five-year SLL for Peabody linked to childcare qualification targets for tenants,
  • January 2020: a £100m five-year SLL for Clarion, the UK’s largest housing association, helping residents into employment,
  • December 2020: A £50m three-year SLL for MTVH linked to reductions in greenhouse gas emissions.