Today , I read a really interesting article on Bisnow about the increase in "green loans", which offer a discount on funding costs if the borrower achieves various sustainability-linked improvements to its development.
The case study in this particular article related to Bruntwood SciTech's funding deal for its development of Circle Square in Manchester, particularly significant as it is the largest deal of its kind outside of London so far for 2019.
Bruntwood SciTech's loan offers discounts if the developer can meet bespoke green covenants, including:
1. achieving a BREEAM "Excellent" rating for their three new buildings being constructed by the anticipated completion in 2021;
2. agreeing "Green Memorandums of Understanding" with occupiers, where the tenants agree to support the developer's ongoing environmental "best practice" in the use of estate facilities.
With a significant shift and rising pressure from all angles for developers to construct more environmentally friendly new-build developments, the availability of improved funding terms is a great incentive to ensure that these can be affordably delivered. I am already negotiating leases to impose BREEAM obligations on tenants and requiring them to enter into "Green Lease Agreements" (although these provisions so far are the result of planning conditions rather than funding-related), so it will be interesting to see if this becomes a requirement of more funders...
Jonathan Cohen, Partner and Head of Energy at Howard Kennedy recently spoke at a conference hosted by the Association of Foreign Banks on the use of sustainable finance.
"It is clear that there is increased appetite from lenders to lend to borrowers that are investing in sustainable projects including "green real estate." New financial products are being developed all the time and this is an area that is quickly moving up the agenda for both lenders and borrowers", said Jonathan.
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