Aviva Investors intends to provide £1bn of sustainability-linked loans to the real estate sector over the next four years.
The move is supported by the company’s proprietary Sustainable Transition Loans Framework, which will be used to seek out sustainable real estate loan investment opportunities in line with the United Nations Sustainable Development Goals.
Loans provided through the lending programme will incentivise borrowers to improve the green credentials of their buildings, including by installing on-site renewables or making the buildings more energy efficient, by embedding carbon-cutting requirements into the conditions of the loan.
Gregor Bamert, Head of Real Estate Debt at Aviva Investors, commented on the announcement: “We believe that by directly linking long-term financial incentives to measurable improvements in the environmental performance of the buildings we lend against, we can incentivise and engage borrowers to consider sustainability factors in a more meaningful way.
“Our target of originating £1 billion of sustainable transition loans reflects a commitment to reducing the carbon footprint of our clients’ portfolios.”
As part of the initiative, Aviva Investors will embed measurable ESG commitments into its lending programme, setting out specific requirements for real estate borrowers to adhere to in order to reduce carbon emissions from buildings.
Borrowers can benefit from a marginal reduction in the cost of debt, awarded when predetermined sustainability improvements have been made.
Vigeo-Eiris (“V.E”), the ESG rating and research agency, has provided second-party verification and accreditation for the framework, to ensure that the loans comply with the LMA’s sustainability-linked loan principles.
Mr Bamert continued: “We see this as a win-win situation. As borrowers meet these requirements, they will benefit from more favourable terms on their financing agreement, whilst our investors gain reassurance that the assets we lend against are more resilient to physical and transition climate risks and with a lower environmental impact.
“Ultimately this should result in better outcomes for all.”
