June 24 (IFR) - Lloyds Bank is hoping to raise its first
Environmental, Social & Governance (ESG) bond, the latest
institution to use the bond market to fund good causes.
The issuer will meet with investors in London and Edinburgh
this week and early next week and will look to launch a sterling
denominated senior unsecured ESG transaction afterwards.
The market for Green and socially responsible bonds has
grown substantially over the last 18 months. Public sector
issuers have so far dominated activity, but Lloyds is aiming to
develop a new branch of this market and align it to its "Helping
Britain prosper" agenda.
"This is different from outstanding Green bonds, there is a
very defined audit trail and our independent auditor will ensure
that the proceeds go to an appropriate place," said a banker.
"We hope this will be the beginning of a more robust framework
for these bonds."
There will be a quarterly use of proceeds report which will
be reviewed and endorsed by Lloyds' external auditor, currently
PwC. The review process is expected to be ongoing for the life
of the bond.
The new benchmark is expected to have a 4.5- to 5-year
maturity and will be held in eligible liquid assets until Lloyds
finds a project to invest in.
RANGE OF OPTIONS
There are a wide variety of projects that the ESG bond
proceeds can by routed to, although Lloyds is planning to focus
on four key areas: agriculture, a regional growth fund,
healthcare and regional SME lending.
The regional growth fund for example is focused on the UK's
most deprived areas as indexed by the Bank of England.
"The bond features a robust and transparent reporting
framework, designed to meet the needs of the growing socially
responsible investment community," said James Garvey, managing
director, head of capital markets and portfolio management at
The bank will try to allocate the biggest part of the bond
to SRI and ESG investors. According to Lloyds, the United
Nations Principles for Responsible Investment has attracted over
1,200 investor signatories, representing USD34trn assets under
management. The signatories have agreed to integrate ESG factors
into their investments.
Lloyds said the decision to launch this bond would not only
support its Help Britain agenda but also help to develop this
(Reporting By Helene Durand, editing by Julian Baker)