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Derwent London’s groundbreaking green Revolving Credit Facility
Securing access to £300 million for sustainable buildings in the capital
Derwent London plc has become the first UK Real Estate Investment Trust (REIT) to sign a green revolving credit facility (“RCF”) – a type of finance ring-fenced funding to be used specifically for green projects that have a positive environmental impact.
Collaborating with our sustainable finance team, Derwent established the requirements for this £300 million facility, which is now supporting their brand of environmentally-friendly new developments and major refurbishments in the capital.
Improving on good practice
Derwent London is the only UK REIT to have been included in the Global 100 Most Sustainable Companies in 2017 and 2018 and maintains its ‘Green Star’ status rating under the Global Real Estate Sustainability Benchmark.
In pursuit of its objective to design and deliver buildings responsibly, Derwent approached our sustainable finance team for help boosting its already sector-leading sustainability credentials.
The company’s aim was to obtain funding that would directly like to their projects’ strong green credentials, and which complies with the Loan Market Association’s (LMA) Green Loan Principles.
Deloitte partner Katherine Lampen said, “Derwent’s ambition to expand green building development and link this strategy to its financing methods matches our own priorities - to support clients on their low carbon transition, and to secure green financing.”
“In Derwent’s case,” said sustainable finance team lead Tasha Clarbour, "this includes obtaining green finance to improve energy efficiency, reduce carbon emissions and reduce consumption of natural resources by their buildings.”
This aligns with the Government’s 2019 Green Finance Strategy, which includes a commitment to at least halve new buildings’ energy use by 2030.
“Collaborating with Derwent on this ground-breaking project, to secure access to ring-fenced green financing that would deliver a positive environmental impact from the development of commercial and residential buildings, was an exciting prospect,” said Susie Douty, sustainable finance team manager.
“We were determined to do everything we could to help the team take this important step on its green journey.”
The Green Finance Framework
Central to agreeing the Green revolving credit facility was the establishment of a Green Finance Framework (the “Framework”).
The Framework sets out the criteria which allows Derwent to classify the debt as green finance, and the reporting requirements for the financed projects that will deliver environmental benefits, like the development or refurbishment of commercial and residential buildings that meet internationally recognised green building standards.
Our team of qualified chartered accountants and sustainable finance professionals brought a wide range of finance and sustainability skills – the right mix to secure this industry milestone.
Working side by side with Derwent, the team helped align the Framework to the voluntary Green Loan Principles set by the Loan Market Association (LMA), the authoritative voice in EMEA for green finance.
“This enabled Derwent to both align with industry-leading green finance principles, and environmental property standards” continued Susie “in a way that was transparent about both the targeted and achieved environmental impacts”.
“The development of this new approach clearly shows the significant role finance can have in helping our business towards its ambition of being net-zero carbon by 2030.”
Strategy in action
The result was success for Derwent London’s green financing.
The company negotiated a £300 million ‘green tranche’ to be spent specifically on green development and major refurbishment projects, as part of their larger five-year £450 million revolving credit facility.
Through the extensive measures taken by Derwent in securing this green facility, the company now has in place the essential structures needed to continue to raise more green financing in the future.
“Working on this project, our hopes as a team were to help to set industry standards for a robust and transparent approach to green financing and reporting” continued Tasha.
“Together with Derwent, we have set a precedent within the industry that we hope more companies will adopt.”
“Linking part of our financing to our projects’ green credentials is an important step towards understanding how we can help reduce our impact upon climate change.”