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Building a greener future

How real estate andhousing are tacklingsustainabilitychallenges

COMMERCIAL BANKING

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By the side of business

Introduction


While the long-term effects ofthe coronavirus pandemic willtake time to emerge, we canalready see that environmentalconcerns are sure to have movedfurther up the nation’s agenda.

Cleaner air, reduced traffic and a newappreciation of open green space wereamong the unexpected secondarybenefits of the crisis, and there can beno doubt that many will be pressinggovernments, authorities andbusinesses to maintain and furtherdevelop these environmental benefitsinto the longer term.

A renewed understanding of theimportance of shared purpose andcollective action has been anotherpositive to draw from the pandemic.

Businesses have been applauded forpivoting their activities to support thecommunal effort, and this too is anoutcome that many will no doubt wantto see continue. Consumers wantbusinesses to act responsibly, whetherit’s looking after their workforce, theircustomers or their community, as well asthe wider environment.

Businesses are now looking harder atwhat they can do to accelerate theirefforts to be more sustainable, tominimise climate-change risks to theirown business, and to support theircommunities more in a changing world.People are recognising whileinvestments for a better future need tomaximise returns financially, this alsoneeds to incorporate social andenvironmental responsibility.

But of course, significant reductions ofcarbon emissions require entirely newways of living and working for ourcustomers and clients, as well aschanges in how Lloyds Banking Groupoperates as we transition to a lowcarbon future. For their part, propertydevelopers, investors and owners mayneed to seek expertise from partnersthat share a similar outlook, to helpthem navigate these new challenges.

Inside this guide

> Financing a greener futuretogether

> Greener buildings at aglance

> Driving innovation, thesustainable way

> Clarion pioneers withsustainability bond forgreener homes

> Lloyds Banking Groupleading by example

> How we can help you

> Further information

Introduction

Businesses have beenapplauded for pivotingtheir activities to supportthe communal effort

At Lloyds Bank we care deeply aboutsustainability both in our ownoperations and in how we can help ourcustomers become greener. We cansupport your sustainability plans,whether it’s funding for new buildings,refurbishment or reconfiguration ofexisting buildings, or investment inother sustainability initiatives.

In this guide you can see how we are:

• introducing a new tool that enablesyou to identify, evaluate andunderstand the return on potentialinvestment to make your propertymore sustainable and energy efficient

• supporting you to build a greenerfuture by helping finance yourinitiatives to reduce your carbonfootprint by improving yourbuildings’ environmental efficiency

• creating innovative financesolutions for sustainability projects.

Doing the right thing can also makesound business sense too, and we’rehere to support you on yoursustainability journey.

Our sustainability credentials:

Financing agreener futuretogether


If your business wants to invest in tackling climate change,we offer support through our industry-leading GreenLending Initiative. The £1bn scheme offers discountedfinance to clients investing in a lower-carbon future.

Benefit from expertise

The transition to sustainable business practices canbe challenging without the right support.

Alongside our track record in supporting clients withgreen and sustainably-linked financing, over 700Lloyds Bank relationship managers have undertakentraining on climate change and sustainability-relatedrisks and opportunities, in collaboration with theUniversity of Cambridge Institute for SustainabilityLeadership. In addition, more than 70 colleagues havereceived real estate sustainability training withenvironmental, social and corporate governance (ESG)specialist Hillbreak. You can be sure that sustainabilityis at the heart of our support for your business. Ourefforts have been independently recognised – LloydsBank has won Real Estate Capital – SustainableFinance Provider of the Year 2019 Europe.

Financing a greener future together

From simple improvements such asenergy-efficient lighting systems, rightthrough to large-scale renewable energyinfrastructure, we can help financeimprovements to increase theenvironmental efficiency of business’buildings. If you’re looking to reduce thecarbon footprint of your estate, there areways we can help – both with finance andby helping you focus your efforts in themost effective way.

It helps to work alongside experts who understand thesustainability landscape and have experience ofworking with a range of partners on a wide variety ofgreen projects. From offshore windfarms to socialhousing, we have provided discounted funding forenvironmental initiatives.

“Since 2017 we've helped clientsimprove the energy efficiency of17.4m square foot of real estate

through the Green LendingInitiative.”

Madeleine McDougall,Managing Director,

Joint Head of Real Estate and Housing

Andy Hulme,Managing Director,

Joint Head of Real Estate and Housing

Greenerbuildingsat a glance


Assessing the opportunity for makingenergy-efficient improvements inbuildings is an essential activity forproperty owners and buyers at severalstages: prior to purchase, duringrenovation, or as part of scheduledmaintenance.

Our new database and calculator, theGreen Buildings Tool, can analyseprecisely how a range of energy-savinginitiatives would affect the energyperformance certificate (EPC) rating ofbuildings. It can show which propertiesoffer the most profitable business case,potentially saving considerable time andeffort in the analysis and sourcing ofproperties and portfolios.

Every measure, building and buildingportfolio is assigned a quantifiablebusiness case value, with details ofinvestment, savings, CO2 reduction andtime to recoup costs. Potential savingsand relevant investment are linked togive an overview of the energy-efficiency measures that can beimplemented. By using onlinetechnology, big data and internetsources, the tool can deliver insight intosustainability at a fraction of the price ofan on-site assessment.

Greener buildings at a glance

A new tool uses exclusivebusiness-case data to enableyou to optimise potentialenergy efficiency investmentsof your property portfoliodepending on theirsustainability, investment andcost saving priorities.

Now a simple but powerful new digitaltool enables business customers ofLloyds Bank to understand their propertyportfolio in a way that is as insightfullygranular as it is cost-effective.

Identifying savings at a glance

Built in association with sustainabilityconsultancy CFP Green Buildings, the toolcalculates potential savings by combiningbenchmark data from CFP’s expertsystem with best practices in the areas oftechnology, operations, maintenanceand management. It is the largest datasystem in Europe, and uses proprietaryinformation that’s not publicly available.

Using the tool, you will be able to seepotential energy-saving and EPCimprovement measures at both buildingand portfolio level.

Carbon savings andmaximised profitability –a virtuous circle

The Green Buildings Tool will help ourclients to maximise profitability andoptimise sustainability across theirproperties, regardless of their size.Clients will be able to plan and budgetfor their sustainability and energy-saving initiatives in a much moreefficient way – and Lloyds Bank canprovide financing for the introduction ofsustainability measures.

Some 500 buildings within the City ofLondon have already been evaluated bythe tool, with the analysis identifying amassive 40,000 tons of potential CO2savings so far. Overall, it’s calculated thatUK businesses could save £4.5 bn ontheir energy bills by 2030, by takingappropriate steps concerning theircarbon footprint.

Talk to your RelationshipManager to ask about thetool and how it could helpyou focus your spendmore effectively.

This screenshot of the dashboard of ournew simple but powerful digital toolshows how business customers canunderstand their property portfolio atboth a granular building-by-buildinglevel and also have a clear view of top-line savings and costs.

“Heating in buildings andindustry creates around

32% of total UKemissions.”

Source BEIS –UK Government Clean

Growth Strategy

Drivinginnovation, thesustainable way


Driving innovation,the sustainable way

Landmark funding from ourGreen Lending Initiativeunderpins the sustainabilityefforts of a key real estateprovider for UK innovators.

Bruntwood SciTech – the only UKproperty business dedicated todevelopment in the science andtechnology sector – has agreed a three-year, £185m funding deal with LloydsBank acting as the Green Coordinator tosupport its sustainable developmentand growth.

The business, a joint venture betweenleading property company Bruntwoodand Legal & General, is using £60m ofthe funding to develop 400,000 sq ft ofspecialist workspace.

This will be located at 2, 3 and 4 CircleSquare, Manchester’s new city centreneighbourhood, which itself is a jointventure between Bruntwood SciTechand Vita Group.

Located in the centre of Manchester’sOxford Road Corridor innovation district– close to the city’s universities, hospitalsand cultural institutions – Circle Squareis set to provide 1.2m sq ft of workspace,100,000 sq ft-plus of retail and leisurespace, and 1,700 new homes throughVita Group.

1.2m sq ftof workspace

1,700new homes

Financial benefits for green achievements

Under the conditions of the £60m Green Loan tranche of the financing,Bruntwood SciTech will secure a discount on its funding costs if it achieves aBREEAM (Building Research Establishment Environmental AssessmentMethod) Excellent rating for the three new buildings on their expectedcompletion in 2021. The company will also sign a so-called ‘GreenMemorandums of Understanding’ with occupiers, in which they agree tosupport ongoing environmental best practice while using the facilities. Theremaining £125m of the funding package will be used as an investment loan torefinance elements of Bruntwood SciTech’s specialist property portfolio, underthe terms of Lloyds Bank’s Green Lending Initiative.

Bruntwood SciTech will secure a discount on the investment loan byagreeing to fulfil bespoke ‘Green Covenants’. The developer has committedto delivering an investment of £3.5m into sustainably linked improvementsacross its estate, covering things such as combined heat and power,storage batteries, and small-scale renewable energy. It has also pledged toreduce the energy intensity of its portfolio by more than 10% over thelifetime of the loan.

Accelerating sustainablegrowth

“Our assets are powering the future ofthe UK’s knowledge economy, helpingto create thriving innovation clusters,like Circle Square, and supporting newbreakthroughs in bioscience and thetech industry,” says Kate Lawlor, FinanceDirector, Bruntwood SciTech.

“We’ve seen significant demand for ourspecialist workspaces and labs – fromstart-ups and scale-ups, to leadingglobal companies.

“This new funding agreement gives usthe platform to accelerate our growthsustainably, providing customers withaccess to facilities that are tailored totheir specific needs and have minimalimpact on our environment.”

Bruntwood has a Gold Low Carbonaccreditation, which it will now aim tosecure across the Bruntwood SciTech

estate. It has also announced a pledgeto be Net Zero Carbon across its newbuildings by 2030, and old buildings by2050.

“By using our Green Lending Initiative,we’re able to help Bruntwood SciTech

achieve its vision while supporting itssustainable investment in the future ofthe UK”, says Richard Heath, ManagingDirector, Private Groups, Real Estateand housing.

“We’ve seen significantdemand for our specialistworkspaces and labs –from start-ups and scale-ups, to leading globalcompanies.

Clarionpioneers withsustainabilitybond forgreener homes


Clarion pioneers with sustainabilitybond for greener homes

Clarion Housing Group is the UK’s largestprovider of affordable housing, witharound 125,000 homes across more than170 local authorities. Its mission is toprovide and maintain good qualityhousing for its residents, and to buildcommunities through high-quality designand place-making.

A charitable social landlord, it reinvests its profits intobuilding new homes, as well as providing support andopportunities to its communities.

As with all charitable social landlords, a focus onpeople is at Clarion’s core. It also recognises theimportance of energy-efficient and low-carbonhomes, both because of the positive impact onreducing residents’ fuel bills, and because of the widerresponsibility it feels on leading sustainability.

Sustainability runs throughClarion’s whole approach

Clarion’s proactive thinking on advancingthe sustainability agenda is also reflectedin its approach to finance. It was the firstUK housing association to adopt the pan-European Certified Sustainable HousingLabel1 back in November 2019.

The label evaluates the positive impact ofaffordable housing companies,considering green and social indicators,and is aligned with international green andsocial bond principles.

As part of an ongoing Investor Relationsprogramme, Lloyds Bank coordinated a non-deal investor update for Clarion in December2019. Integral to this process, Clarionhighlighted details of its new SustainableHousing Finance Framework, including theexpert opinion that it had sourced.

Pioneering 15-yearsustainability bond

Strong sustainability credentialsunderpinned the success of the landmark15-year 1.875% bond which the Groupthen priced in January 2020, with LloydsBank as joint lead manager. The bond wasthe first sustainability bond from the sectorand generated significant investor interest,including many overseas accounts whichhad not previously invested in UK housingassociations.

“As the UK’s largest affordable housingprovider, creating truly sustainablecommunities where people can thriveis at the core of our mission. This newgreen bond will help us do that. Moneyraised will be used exclusively for thedevelopment of new-build energy-affordable homes in line with oursustainability framework.”

Rob Lane, Group Commercial Services Directorfor Clarion Housing Group

Lloyds BankingGroup leadingby example


Lloyds BankingGroup leading byexampleLloyds Banking Group has anextensive estate of buildings that weoccupy either as freeholder and as atenant on a leasehold basis.Reducing the carbon footprint of ourown operations is a criticalfoundational element to our groupsustainability strategy.

Our carbon reduction progress

Since 2009, we have reduced our carbonemissions by 63%. Key to achieving this was anextensive energy optimisation programme,reducing our gas and electricity consumptionby 43%. We work with our energy managementpartners to undertake continued optimisationof building management systems, ensuringthat heating, ventilation, air conditioning andlighting systems are matched to building usage.

We have been sourcing renewable electricityfor our UK operations since 2018, through amix of direct sourcing from renewable projects(~25%) and the purchase of renewable energycertificates. We aim to increase the proportionof electricity sourced through new renewableprojects to at least 60% by 2025. In early 2020,we began an engagement programme withour landlords, to understand where we occupybuildings powered by renewable electricityand identify opportunities to extendrenewable electricity sourcing.

Accelerating our action on climate

We continue to pursue our long-term target toreduce emissions by 80% by 2050 and willaccelerate our activity in 2020, developing newcarbon, energy and travel targets. We arecontinuing with existing targets to reduceoperational waste by 80% by 2025, comparedto 2014/15, and water consumption by 40% by2030, compared with 2009.

We know this won’t be easy, but it matters to us.By collaborating and innovating with our suppliers,partners and leading global organisations, webelieve that the solutions are within reach.

“We have reduced our carbonemissions by 63% over the last

decade.”

Lloyds Banking Group

“We nowsource 100%renewableelectricity forall our ownbuildings”Lloyds Banking Group

How we canhelp you


How we can help you

Real estate and housing clients can access green and sustainability-linked financing toimprove the energy efficiency of their estates.

We can help support your sustainability plans with financing, whether for the development of new sustainablebuildings, the refurbishment or reconfiguration of existing buildings, or to invest in other efficiency initiatives todrive sustainability performance.

We welcome early discussions to see how we can help. This may be by providing funding at discounted marginsusing our Green Finance Initiative, or by sharing best practice through our real estate communities. Otherincentives may also be available, such as reimbursing technical design or energy audit costs, for projects that leadto impactful energy efficiency investment.

Don’t forget to ask your relationship manager for access to our new Green Buildings Tool, to help you analysewhich energy-saving initiatives could work best for you.

All lending is subject to status

Want toknow more?If you would like more information ongreen funding, or to discusssustainability strategy, please contactyour Relationship Manager or:

David WillockManaging Director, Structuring andSustainability, Real Estate and HousingM: 07920 722913E: [email protected]

twitter.com/lloydsbankbiz

mailto:[email protected]

Further information


Sources

1Certified Sustainable Housing2Reduction in Scope 1, Scope 2, and Business Travel emissions, calculated using the location based method, against a baseline year of 2009.

Important information

Our service promiseIf you experience a problem, we will always try to resolve it as quickly as possible. Please bring it to the attention of any member of staff. Our complaints procedures forbusinesses with an annual turnover of up to £25m are published at lloydsbank.com/business/contactus and for businesses with an annual turnover of £25m or morethey can be found at commercialbanking.lloydsbank.com/contact-us/

Security informationPlease note that any data sent via e-mail is not secure and could be read by others. While all reasonable care has been taken to ensure that the information provided iscorrect, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only andshould not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.

Please contact us if you would like this information in an alternative format such as Braille, large print or audio.

Lloyds Bank is a trading name of Lloyds Bank plc and Lloyds Bank Corporate Markets plc. Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN.Registered in England and Wales no. 2065. Lloyds Bank Corporate Markets plc. Registered office 25 Gresham Street, London EC2V 7HN. Registered in England andWales no. 10399850. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authorityunder registration number 119278 and 763256 respectively.

Securities services offered in the United States are offered by Lloyds Securities Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission and amember of the Financial Industry Regulatory Authority.

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Registered in Singapore UEN: T18FC0067A. Licensed and regulated by the Monetary Authority of Singapore. Your contractual counterparty will be Lloyds BankCorporate Markets plc if you enter into any product or transaction with us in Singapore.

We adhere to The Standards of Lending Practice which are monitored and enforced by the LSB: www.lendingstandardsboard.org.uk. The Standards of LendingPractice apply to businesses which have an annual turnover of no more than £25m.

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Lloyds Banking Group is a financial services group that incorporates a number of brands including Lloyds Bank. More information on Lloyds Banking Group can befound at lloydsbankinggroup.com.

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