A Hertfordshire-based housing association has secured a sustainability linked loan to improve the energy efficiency of its homes – and build hundreds of new ones.
B3 Living has obtained £50m from Lloyds Bank. This is the first loan linked to its sustainability performance that the organisation has taken out.
The loan links borrowing costs to agreed performance targets. Depending on how well B3 performs in meeting these agreed goals, then the costs of the borrowing are reduced, relative to its performance.
The first goal – or KPI – relates to retrofitting existing stock to ensure it is going above and beyond the current minimum regulations to bring all its properties up to at least EPC C by 2028.
The move, which would put it two years ahead of the 2030 milestone, aligns to B3Living’s wider strategic target to help support homeowners and tenants to reduce energy costs.
Secondly, the organisation, which supports around 12,000 people in 5,000 homes among its communities in Broxbourne and the wider south east Hertfordshire area, is currently rated as “Silver” via the SHIFT sustainability framework.
B3 Living aims to enhance its SHIFT score year-on-year with the ambition of achieving a stretching SHIFT “Gold” status in 2024, and continuing to target a further numerical uplift in following years.
Finally, it aims to build at least 50 energy-efficient, “affordable” new build homes a year by 2028, of which 70% will be in Broxbourne to help tackle the ongoing shortage of affordable housing in the borough.
The new homes will be built to EPC B specifications and above. The support from Lloyds Bank, of which B3 Living has been a customer since 2015, forms part of the lender’s own target to support the UK’s delivery of a million new social homes by 2033.
Alex Shelock, executive director for finance at B3Living, said: “In this current operating environment of high inflation and rising interest rates coupled with political and economic uncertainty, organisations like ours have a tough balancing act in terms of protecting financial resilience whilst delivering for our customers and communities.
“The transition towards net-zero carbon is a key strategic priority for B3Living, and this type of flexible and incentivised loan is an excellent avenue for us to stretch our ESG ambitions and deliver benefits for existing customers as well as those yet to be housed. It also strengthens a nearly decade-long partnership between Lloyds Bank and B3 Living.”
Lauren Bailey, associate director of real estate and housing at Lloyds Bank, added: “The work that organisations like B3 Living does is incredibly important in the UK’s efforts in tackling climate change and making our current and future housing stock fit for the future while addressing the supply challenges the residential property market currently faces. We’re proud to support them and help them achieve their ESG and housebuilding ambitions in the coming years.”
B3 Living was advised by the banking team at law firm, Winckworth Sherwood.
Lucy Grimwood, social housing finance partner at the firm, said: “Funding agreements with interest rates linked to sustainability targets are increasingly commonplace and can provide great opportunities for social housing providers as the sustainable finance market develops. It was a privilege to advise B3 Living on extending its funding facilities and we look forward to continuing to support them going forwards.”
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