London & Quadrant Housing Trust provides update on
progress against targets in relation to £300 million Sustainability
Linked Bond
In January 2022, L&Q became the
first housing association in the UK to issue a Sustainability
Linked Bond (SLB) under its Sustainability Finance Framework
published in September 2021. The £300m SLB will mature on 31st
March 2032 and was priced at Gilts + 87 bps, giving a coupon of
2.00%.
The sustainability linked component
was structured against three highly ambitious sustainability
performance targets around reducing operational carbon emissions,
improving the energy efficiency of residents' homes, and delivering
new affordable homes.
The SLB requires L&Q to achieve
the following Key Performance Indicators (KPIs) by 31st March
2024:
- KPI 1:
Reduce scope 1 and 2 greenhouse gas emissions by 20% against a
baseline of 31 March 2020.
- KPI 2: Achieve an
average calculated Standard Assessment Procedure (SAP) score of 72
or above (low Energy Performance Certificate - or EPC - band
C).
- KPI 3:
Build 8,000 new homes, of which 50% are affordable.
In today's update, L&Q confirms
that it is on track to meet KPIs 2 and 3, relating to building new
homes and improving energy efficiency of existing homes. However,
KPI 1 is likely to be missed, largely due to wider macro-economic
factors. All KPI results will be confirmed in our 2024
Sustainability Report, to be published in September 2024. Missing
the KPI 1 would trigger a 'Step Up Event', with the coupon rate on
the issued notes increasing from 2.00% to 2.125% from
30th September 2024 until maturity.
Waqar Ahmed, Group Director of
Finance at L&Q, said: "In issuing the sector's first SLB, we
were determined to set very ambitious targets that would challenge
us to maximise our social and environmental impact over a number of
years.
"Despite a number of challenges, we
have continued to improve the energy efficiency of our residents'
homes as part of our wider Major Works Investment Programme. This
programme will see L&Q invest a record amount in existing homes
over the coming years to improve safety, quality, and
sustainability."
"This investment meant we took the
strategic decision to reduce our development programme in the
short-term, but our commitment to tackling Britain's housing crisis
remains. We have continued to develop thousands of new homes, with
at least 50% of these affordable. Our new build homes have to meet
EPC B, so focusing on existing homes that are below EPC C is
critically important, both in terms of our environmental ambitions
and to the lives of our residents.
Mr Ahmed added: "One of the primary
ways we were planning to meet the greenhouse gas target was through
the use of renewable energy. However, widespread disruption to the
wholesale energy markets caused the price of renewable energy to
soar."
"This coincided with the
cost-of-living crisis and therefore we had to make tough decisions
on budgets everywhere, especially where there may have been an
impact around costs passed on to residents."
"While this is disappointing, we
still saw cumulative emissions reductions to the periods
ending 31st March 2022 and 2023. We remain committed to making
our homes more energy efficient, and have a £68m sustainability
programme that includes £27m that we secured through the Social
Housing Decarbonisation Fund."
Our ongoing commitment to contribute
to achieving net-zero remains strong. demonstrated by the fact our
financial plan has dedicated £169m through to the 31st March 2030
to improving our Standard Average Procedure (SAP) rating, with the
ambition of achieving a rating of 74.5 by this
time."
For further information, please
contact:
investors@lqgroup.org.uk
James Howell, Head of External
Affairs
020 8189 1596
www.lqgroup.org.uk
END