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Red hot green finance


2021 has seen a surge of green finance activity. We take look at the rise of green loans: what’s on offer, who’s in the market and how they benefit the planet.

Given the relative infancy of the product, the criteria can vary between lending institutions but the common objective is for lenders to incentivise sustainability improvements by aligning the loan terms to pre-determined performance targets and covenants.

There are various definitions used within green finance but the following Loan Market Association (LMA) definitions are broadly accepted:

  • Green loans: proceeds usually apply to 'green projects' eg sustainable buildings, retrofits or renewable energy infrastructure 
  • Sustainability linked loans: May not be specific to green projects but the terms of the loan incentivise the borrower to enhance their sustainability performance. 

Green Bonds have been a more-established feature of the market and reflect more traditional project financing for investors wishing to invest in a fixed income product with sustainable credentials. 

What's driving the demand?

Demand for green loans is coming partly from a desire to act on climate risk on the part of both the lender and the borrower, and partly from regulation.  

The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) established a set of climate-related disclosure recommendations. This private-sector-led organisation comprises of 31 members from across the G20, representing both preparers and users of financial disclosures and is supported globally by more than 1,000 organisations. The effect is to standardise the level of disclosure for all commercial companies with a UK premium listing. This is likely to be extended to asset managers, life insurers and FCA-regulated pension funds. The TCFD established four pillars of disclosure:  

TCFD established four pillars of disclosure - Governance, Strategy, Risk Management and Metrics and Targets


Many of these in-scope organisations hold property investments and so have actively engaged strategies to mitigate risk and demonstrate progress on the greening of their assets. 

Additionally, the Sustainable Finance Disclosure Regulation (SFDR) is one of a number of regulatory measures brought in by the EU Sustainable Finance package. It introduces reporting requirements for investors operating in the European Union and initially came into effect in March 2021 with a transition period to full compliance by 2023, by which point all financial market participants will have to comply. 

How is green finance benchmarked?

May 2021 saw the release of the Climate-Related Commercial Real Estate Lending Due Diligence Guide by the Commercial Real Estate Finance Council (CREFC). It aims to help lenders evaluate CRE lending collateral from the sustainability perspective in line with LMA principles. 

CREFC’s guide is a timely publication, given growing demand for sustainable lending products and increasing regulatory requirements in this sector.  

  • It is effectively a checklist of questions to assess climate related risks and opportunities on each loan, such as:
  • The Borrower’s approach to climate risk and sustainability, including governance and reporting, net zero commitments and approaches to monitoring and metrics.
  • The climate risks and opportunities presented by the real estate asset(s) being financed
  • Energy performance certification and accreditations
  • Potential for retrofitting buildings
  • Sourcing of plant and material and supply chain activity
  • Engagement with occupiers and the local community on sustainability and environmental matters. 

Each item can be risk assessed, providing a useful ready reckoner for compliance with climate-friendly procedures.

Who's lending?

Most of the major lending institutions offer green finance to sustainable projects and businesses. Examples include Triodos Bank, Barclays and Lloyds. In terms of the major real estate lenders, recent examples include: 



Aviva Investors

£73million 7-year loan to Commercial Estates Group with KPIs linked to sustainability improvements on assets in the portfolio of six regional office assets.

£154m 10+ year loan to CLS Holdings to refinance 11 offices and a mixed use scheme in London and the South East, carries a margin reduction up to 10 points if KPIs are met.

Consortium of HSBC, Credit Suisse, Qatar National Bank, Intesa Sanpaolo, and United Overseas Bank

£450m loan to Qatari Diar to finance the construction of a luxury retail and hotel scheme in London. The development will implement a range of world-class sustainable features (such as green roofing, water-and energy efficient design) and is targeting a rating of BREEAM Outstanding.

Consortium of NatWest, Lloyds Bank, Santander and HSBC UK

£95m 3-year loan to Bruntwood SciTech to invest in a number of science parks and commercial buildings. Carries a margin discount against KPIs such as waste and recycling, green energy procurement and a pledge to reduce the energy intensity of its portfolio by more than 10 per cent over the lifetime of the loan.

Scottish Widows

£62m loan to CLS Holdings on five UK office properties over 12 years. Includes a 10 bps margin reduction if targets are met.

Allianz and BNP Paribas

€185m loan to Icawood for the redevelopment of a low-carbon major mixed use complex (office, retail and student residence) in Paris.


£75.5m loan to Hines Pan-European Core Fund (HECF) for the Werfthaus office building in Frankfurt and an urban logistics park near Heathrow, London. Both assets display above average energy performance and have DGNB and BREEAM certification respectively.


Green Bonds



SEGRO European Logistics Partnership

SEGRO issues an 8-year, €500m green bond to finance projects in its Green Finance Framework, as well as providing funding for general corporate purposes. Coupon of 0.875%.

Atrium European Real Estate

Atrium issued a 5-year €350m green hybrid bond to invest in its residential for rent programme. Coupon of 3.625%.

Canary Wharf Group

CWG issue £900m 5-year green bond in three tranches to finance or refinance a selected pool of new and existing assets that promote the transition to low-carbon and climate resilient growth on the estate. Coupons of 1.75% - 3.375%.

Workspace Group

Workspace issues a €300m 7-year green bond to help finance refurbishment and redevelopment projects across its flexible workspace properties. Coupon of 2.25%.


What next?

The above examples are likely to be followed by dozens more throughout 2021, as the appetite grows across all sectors of the market. Additionally, the UK will host the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in November. This is highly likely to be a focus for many organisations to announce ever-more ambitious plans in the world of green finance. Those who fail to join the movement may be left ‘green’ with envy.

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About the author

Sara Duncan is head of UK Valuation and Advisory services for Colliers.  Her expertise lies in appraisal and valuation work for lenders and investors, as well as real estate investment strategy and risk management.  She manages a team of more than 100 advisers who provide market analysis and property valuations across a wide range of asset classes for lenders and asset owners across the UK and EMEA.  

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Sara Duncan

Head of Valuation and Advisory Services

Valuation and Advisory Services

London - West End

Sara has experience in both client-side and advisory businesses, with a background in valuations, real estate finance, investment strategy, development, asset managment and transactions management.  

Prior to joining Colliers in 2016, Sara led the EMEA Credit Risk Review function at GE Capital's €12bn Real Estate business.  Sara’s real estate career began at  DTZ, where she held roles within the Agency, Development, Valuations and Corporate Finance teams. 

Sara has lived and worked in continental Europe and has expertise across all asset classes in European markets.   Shis is a Felllow of the Royal Institution of Chartered Surveyors (FRICS) and a Member of the Royal Town Planning Institute (RTPI).  Sara is a member of the Colliers EMEA ESG SteerCo and a member of the CIVAS Global Valuation  Board. 

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