The benchmark holding lenders to ESG targets

A loan deal between ING and Gecina is the first to be indexed on its GRESB rating.

The first commercial real estate loan to be priced in relation to sustainability performance rated by the Global Real Estate Sustainability Benchmark, has been provided by ING Real Estate Finance to French REIT Gecina.

The debut €150 million ‘sustainable improvement loan’ demonstrates the increasing scope for real estate finance deals to be arranged in reference to environmental, social and governance criteria.

The margin for the seven-year revolving credit facility depends, among other metrics, on Gecina’s ESG performance, measured by Amsterdam-based GRESB, an industry-driven organisation that assesses the sustainability performance of real estate portfolios.

“We can obtain margin discounts depending on our GRESB score, but we could also be penalised with an increase in margin if we underperform. This way, we can find motivation to improve our score,” Gecina’s chief financial officer, Nicolas Dutreuil, tells Real Estate Capital.

“But this is also a matter of conviction. We want to show our investors we are not only engaged with ESG in the portfolio asset management, but also on the liability side of the balance sheet.”

With a score of 93/100, Gecina ranks fourth among office REITs globally, according to GRESB, which benchmarks the firm’s performance against its peers through a package of ESG indicators.

“Even if we stayed at the same score, the margin would be stable, which is a good incentive for us. We are managing more than 2 million square metres of office space, mainly in Paris and the Paris region, this means there’s always a way to continue to improve the quality of our buildings and, eventually, our score,” Dutreuil says.

Although the margin and sustainability performance-linked terms of the loan have not been disclosed, Dutreuil notes the loan margin is in line with similar revolving credit facilities issued in the market currently. Real Estate Capital understands this type of loan is priced at over 100 basis points for terms around seven years.

The new green financing formula highlights a widening framework for sustainable loans, which is already being assessed by lenders. “We have a number of bank members that are looking to similar loan programmes,” says GRESB’s Ruben Langbroek.

“Analysing GRESB’s results provides lenders an approach to better understand the risks and possible opportunities related to the borrowers. It also offers an opportunity to improve the monitoring of their loan portfolios.”


Roland Mees, director of sustainable finance at ING, agrees that sustainable companies have “better credit risks” at a portfolio level. Several lenders have already put in place sustainability lending goals. In the UK, Lloyds is lending through a £1 billion (€1.2 billion) green fund that provides margin discounts. ING is aiming to double the volume of its ‘climate finance’ portfolio by 2022, from €14.6 billion reached in 2017. ING’s low-carbon real estate portfolio totalled €9.3 billion at the end of last year.

“We started last year with this type of sustainability improvement loan, where the margin is linked to the sustainability achievement of the client. After closing a number of corporate loans in 2017, this is the first one tailored specifically for the real estate market,” Mees says.

The lender is now in talks with the main real estate sponsors about the bank’s sustainable financing offering, Mees notes. “The GRESB scoring could be a very good vehicle to model a sustainable improvement loan.”

Gecina has been part of the GRESB’s benchmark since 2012, making progress globally each year, with the exception of 2015. The firm forms part of the 850 real estate companies assessed by GRESB last year – a significant increase since 2010, when the organisation had about 200 reporting entities.

“Institutional investors of real estate equity expect transparency and disclosure on ESG topics,” says Langbroek. “But this focus on ESG is now also impacting green financing, including loans and bonds. This is slowly becoming mainstream.”