L&Q launches milestone £300 million Sustainability-Linked Bond issuance

The first Sustainability-Linked Bond (SLB) from the housing sector will help the housing association achieve a set of ambitious social and environmental targets.

Last September, L&Q published its first Sustainable Finance Framework, which paved the way for the housing association to use a range of loans and bonds to boost environmental and social outcomes as it aims to be a net-zero carbon business by 2050.

The 10-year SLB will mature on 31 March 2032 and is priced at Gilts + 87 bps, giving a coupon of 2.00%.

The sustainability linked component is structured against three highly significant targets around reducing operational carbon emissions, improving the energy efficiency of residents’ homes, and delivering new affordable homes.

The SLB provides a clear set of financial incentives, requiring L&Q to reduce scope 1 and 2 greenhouse gas emissions by 20% against a baseline of 31 March 2020, and build 8,000 new homes of which 50% are affordable.

Additionally, the SLB will require L&Q to achieve an average calculated Standard Assessment Procedure (SAP) score of 72 or above.

These are the first in a series of strategic targets to be set by L&Q with the aim of achieving net zero carbon by 2050.

Waqar Ahmed, L&Q Group Director of Finance, said: “We are thrilled with the successful placement of this landmark Sustainability Linked Bond, which is a first for our sector. It will allow us to meet our stated objectives and further strengthen our liquidity position, while stretching us to achieve environmental and social targets that greatly benefit our residents and the wider community.”

“L&Q aims to be a net-zero carbon business by 2050. We want to enable sustainable economic and housing growth, to safeguard the environment, and to collaborate with others to achieve significant improvement in social impact and social value.”

Martin Watts, Director of Treasury, said: “The SLB is priced at the lowest re-offer credit spread achieved by L&Q to date, and clearly demonstrates the positive reception received from investors despite competing supply and recent wider market volatility.”