£75m sustainability-linked loan incentivises affordable childcare programme

15-Aug-2019


UK Housing Association Peabody Trust has secured a new 5 year £75m revolving credit facility provided by BNP Paribas.

The facility is structured as a sustainability-linked loan (SLL) where the interest rate is tied to Peabody meeting social impact-based key performance indicators.

Under the terms of the agreement, Peabody will benefit from a lower interest rate margin on the loan if it delivers an agreed number of accredited childcare qualifications under their Childcare Training Programme.  This target rises incrementally over the 5 year life of the loan.

Peabody will draw on the loan for general corporate purposes in their mission to provide affordable housing and will reinvest interest rate savings into the Peabody Community Foundation (PCF), which benefits thousands of Londoners every year and meets several UN Sustainable Development Goals (SDGs), including no poverty (SDG1), decent work and economic growth (SDG8), reduced inequality (SDG10), Sustainable cities and communities (SDG11), and partnerships (SDG17).

The loan is part of BNP Paribas’ programme of responsible investment in the UK social housing sector, generating sustainable returns and adding social value in its area of operations. Like Peabody, BNP Paribas has operated in the UK since the 1860s and both are committed to aligning their businesses to the UN SDGs.

Susan Hickey, chief financial officer at Peabody said:

“We know that the lack of flexible, affordable childcare in London is a major problem. It leads to lower rates of employment, disproportionately affecting mothers, and contributes to unacceptable levels of inequality and child poverty. Many working people find themselves burdened by debt from expensive childcare costs. Alongside BNP Paribas, we are determined help tackle this issue in our communities. This loan facility will contribute to our wide-ranging activities including delivering the low-cost homes that are desperately needed. But the savings we’ll make on interest payments by facilitating affordable childcare will be directly invested into the Peabody Community Foundation. Innovative funding arrangements like this are a win-win for people living in our neighbourhoods. We’re pleased to be working with the investor community to maximise our impact in helping people prosper.”

David J Reynolds, global banking BNP Paribas said:

“As an independent not for profit sector, Housing Associations have a long standing philanthropic social housing legacy dating back to the 19th century. In recent years, the role of private finance in the sector has grown significantly and in the last 12 months has evolved to include, for the first time ever, structures linked to social purpose. BNP Paribas has had the privilege of working with three UK Housing Associations to provide liquidity through individually tailored SLL’s. Peabody is the first to use a Childcare metric while L&Q and Optivo were both linked to employment. For us, this is about partnering with Housing Associations for the long term and supporting their continued drive to improve residents’ and communities’ quality of life, health and wellbeing”