Lloyds Bank has launched a new £1bn fund to help owners of commercial real estate improve the energy efficiency of their buildings.
The bank claims that over the life of the fund, the amount of energy saved could be as much as 110,000 tonnes of carbon – equivalent to the output of more than 22,000 homes.
Property owners will be able to access the fund, which is the first of its kind, after undergoing a test to assess how much energy efficiency a borrower can achieve.
The better they perform on the test, the better the rates they will be able to access, up to a discount of 20 basis points below Lloyds' agreed price on new loans of £10m or more.
By offering a margin discount on green loans, Lloyds Bank said it can support its clients’ sustainability programmes and incentivise improved energy efficiency. It also hopes it will spark interest from investors for sustainable fixed income products for the UK market, such as green bonds.
Buildings are responsible for almost 40pc of energy consumption and 36pc of carbon emissions in the UK.
John Feeney, global head of commercial real estate at Lloyds Bank, said he expects the typical loan to be between £50m and £100m.
“Environmental issues have come up the agenda so quickly and what it comes back to is that more and more capital is coming from sovereign wealth funds, or pension funds, and they’re under pressure from people who invest in those, or their citizens, to do more in an environmental sense,” he said.
The issuance of climate change-focused bonds has become more common in recent years. Analysis commissioned by HSBC last year found the global green bond market is now estimated to be worth almost $600bn.
Last year, Transport for London issued a £400m green bond to raise money to invest in infrastructure and environmental issues such as energy and climate resilience, air quality and pollution prevention.
Mr Feeney said he expected other lenders to follow Lloyds’ lead as the appetite for green financial products increases.