Specialist buy to let lender Paragon has taken the unusual step of issuing a so-called Green Bond to fund attempts to make the private rental sector more energy efficient.
A green bond is a financial instrument raising money specifically for climate and environmental projects; in Paragon’s case, this is a £150m bond, quickly sold out. It is the first UK bank to issue this kind of bond.
The proceeds will be allocated to green loans incentivising landlords to mitigate climate change.
The Paragon Group has recently launched green product offerings in the buy to let mortgage market to support landlords in improving the energy performance of their properties in the private rented sector, and it says it intends to introduce green initiatives across other lending areas.
A statement from the lender says housing is currently responsible for 22 per cent of the UK’s greenhouse gas emissions.
Under recent government proposals, all property let to new tenancies must have an Energy Performance Certificate rating of at least C by April 2025, and this requirement will apply to the entire private rental sector by 2028.
The government has an overall target of making the UK’s housing stock carbon neutral by 2050.
“This Green Bond demonstrates our commitment to support more landlords improve the energy performance of their rental properties, reducing carbon emissions as well as energy bills for tenants” explains Nigel Terrington, Paragon chief executive.
He adds: “Under the government’s ambitious plans, 2.9m rental homes will need to improve energy performance over the next few years. Government, landlords and lenders should work together to meet this target, and green finance will play a critical role.
“We’re delighted to have received overwhelming support from the investment community on our plans to put sustainable lending at the heart of our strategy.”