L&Q secures largest sustainability loan for affordable housing project

L&Q has secured its largest-ever sustainability-linked loan, worth £525m, to build 8,000 homes.

The funding, agreed with Lloyds Bank, will be used to deliver more sustainable, affordable housing, as the housing association aims to reduce its scope one and two emissions by 20 per cent by 2024. Half of the 8,000 new homes will be affordable.

Following the agreement, L&Q’s existing funding will be transitioned to a sustainability-linked loan. It is the largest of its kind secured by the group and offered by Lloyds to the UK housing sector.

Under the terms of the deal, the funding will offer margin discounts, based on L&Q achieving two key performance indicators (KPIs).

The first focuses on the company achieving an average EPC C rating on all homes by April 2024, which will reduce carbon and lower fuel costs for residents.

The second requires that half of the planned 8,000 new homes that L&Q builds by 2024 will be affordable – acting as an interim target of its longer-term ambition to deliver 30,000 homes by 2030.

L&Q director of treasury Martin Watts said the firm was “committed to making our operations more sustainable” and doing its part to deliver more affordable housing in the UK.

He added: “This funding will help us on our net-zero journey, allow us to achieve the objectives of our corporate strategy and have a positive impact on our residents.

“Only by working closely with finance providers will we create a more sustainable sector, and we are committed to doing that alongside Lloyds Bank.”

L&Q serves about 250,000 people in more than 105,000 homes as one of the largest housing associations in the UK. It primarily works across London and the South East.

Lloyds Bank director of origination & sustainability Chris Yau said: “Tackling climate change is a challenge that housing associations must face as they modernise existing portfolios and build the homes required to tackle shortages.

“Sustainability-linked loans support housing associations like L&Q to achieve their ambitions – providing the funding they need, and rewarding them for meeting targets that benefit their customers and the environment.”

L&Q recently signed up to the industry-led Sustainability Reporting Standard for Social Housing, which covers 48 criteria, including net-zero targets, affordability and safety.

Sustainability-linked loans are a form of socially-responsible finance and focus on the borrower’s general activity rather than a specific project.

They look to improve a borrower’s social-responsibility profile over the repayment period by aligning the cost of borrowing to performance, measured using stated indicators such as carbon-emission reduction or the number of women in senior positions.

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