Lloyds to offer discounted margins through £1bn ‘green’ CRE lending fund

Lloyds has launched a £1 billion ‘green’ commercial property lending initiative which will allow it to provide margin reductions of up to 20 basis points on loans which finance energy-efficient schemes.

The Green Lending Fund will be used to subsidise discounted margins offered to borrowers which plan to actively improve the sustainability of their commercial real estate. Lloyds said that it hopes the fund will act as a catalyst for the origination of loans which tap into growing investor demand for sustainable fixed-income products such as green bonds.

Under the lending programme, new borrowing requirements of more than £10 million will be eligible for a margin reduction if the borrower meets and maintains agreed energy/CO2 saving performance indicators.

Environmental consultancy Trucost has advised Lloyds on creating a tool to benchmark borrowers’ sustainability performance. The tool will be used to test the initial eligibility of the loan and will set performance indicators structured to adhere to the Green Bond Principles.

“Many of our clients are already pioneering energy efficiency in the real estate sector,” said John Feeney, global head of commercial real estate at Lloyds Bank. “However, there’s much more that can be done and, as a major provider of funding to the sector, we believe we can have a positive impact supporting our clients as they work to create a greener-built environment. We hope, through taking leading action, other lenders will join us and work together to maximise impact on this issue of generational importance.”

The bank estimates that the initiative could help to generate carbon savings equivalent to around 110,000 tonnes on the basis of the average four-year loan tenor.

Lloyds is aiming to integrate sustainability into lending products in other areas of the organisation. In 2014 and 2015 it launched £500 million of Environmental Social and Governance bonds and term deposits.

James Garvey, managing director, head of capital markets at Lloyds Bank, said: “We see significant investor interest in green and sustainable assets across the capital markets spectrum. Therefore, we want to continue to take the lead in innovating products in order to help spur growth in this essential market.”