BNP Paribas has provided £225m in sustainability-linked loans, with a pool of capital available to housing associations targeting social impact initiatives.
One of the key drivers for us wanting to build up our presence within housing associations is the natural social angle, which housing associations have running through their DNA.
We have looked at what they are doing from a social perspective and stretched those targets. We give a discount on the margin of the loan if they hit those predetermined targets.
The bank has allocated a pool of capital that we are able to access in these instances of positive banking and sustainable lending. We are looking at housing associations that display strong governance, have good management teams and fit the right profile in their approach to sustainability.
This is part of what BNP Paribas is trying to do from a positive banking perspective. It is one way in which we can really support our clients.
Our £100m loan to London & Quadrant was the first of its kind in the UK real estate sector. This and our five-year £50m revolving credit facility with Optivo were targeted around getting people back into work. That’s because both L&Q and Optivo had existing foundations that explicitly supported this already.
The most recent deal with Peabody is still a social metric – it is around supporting their residents into achieving accredited childcare training. These qualifications are a pathway into employment, and they create affordable childcare for the wider community.
We are also exploring environmental metrics, and hope to work with the real estate sector to reduce carbon dioxide and construction waste.
These issues are becoming more and more relevant in society, and banks have a role, just as many other stakeholders, in supporting communities and the economy. Everyone needs to play their part to support this. BNP Paribas is doing its bit, and we are very focused on it.
David J Reynolds is a senior banker at BNP Paribas
‘This type of deal benefits both parties’
Optivo’s recent £100m in deals with BNP Paribas and First Abu Dhabi Bank UK are strongly linked to our purpose to build homes, make places and enhance lives.
Both banks have set us targets for the number of people we help into jobs or training. We need to meet our social impact targets in order to qualify for our loan savings.
In practice, this means we need to provide certification to the banks on these measures.
As with any loan, we’ve provided documentation to the banks to prove our creditworthiness and show we’re a financially robust organisation. The same applies to our social impact performance – we need to certify what we’ve done to be eligible for the interest rate discounts.
This type of deal benefits both parties. Environment, social and governance-based investing, or sustainable finance, is growing.
Lenders are willing to forego some short-term financial returns as a contribution to longer-term sustainability.
What’s in it for us? As a housing association, we’re obviously committed to providing affordable housing. But we’re also about more than just bricks and mortar – we also want to help our residents live their best lives.
By helping people develop their potential, we can help build sustainable communities, and this in turn helps maintain successful tenancies – it’s a virtuous circle.
Paul Hackett is the chief executive of Optivo
