£270M Deal Means Green Property Lending Edges Closer To The Mainstream

Can property lending ever be deep green? Is it doomed to be a superficial top-coat of colour splashed over an old-fashioned product?

LGIM Real Assets and a syndicate of bankers think they’ve cracked it with a £270M green facility, one of the largest ever agreed in the UK.

It could take the green property lending market to the next level.

LGIM secured the loan from HSBC, NatWest and Standard Chartered for its £500M Wandsworth build-to-rent scheme.

The funding is aligned with the Loan Market Association’s Green Loan Principles, and it's one of the largest sustainable finance facilities in the housing sector to date. The principles say that loan proceeds are to be used to finance green projects that meet regional, national or internationally recognised standards or certifications for sustainability.

The principles build on the internationally recognised Green Bond Principles administered by the International Capital Market Association, with the idea of promoting consistency across financial markets. 

The principles suggest several broad categories of eligibility for green projects funded from the loan proceeds. These include climate change, natural resources depletion, loss of biodiversity, and air, water and soil pollution. 

Borrowers also have to keep up to the mark, showing how the project, and their overarching objectives, strategy, policy and/or processes, relate to environmental sustainability. Borrowers are also encouraged to disclose any green standards or certifications to which they are seeking to conform.

There is a process of verification to make sure both the lender and the borrower are sticking to the spirit as well as the letter of the deal.

The Wandsworth scheme will deliver more than 1,000 homes, 35% of which will be affordable, and more than 60K SF of commercial space. Construction work is already underway with the first homes to be ready for occupation next year.

LGIM Real Assets has committed £2.5B to the BTR sector to date, with 20 sites in Salford, Bath, Manchester, Birmingham, Leeds, Bristol, Chelmsford, Glasgow, Cardiff, Brighton, London and Southampton.