B3Living: Sustainability-linked loan with Lloyds Bank supporting energy-efficient homes

Who:  B3Living and Lloyds Bank
What: A £50m loan with discounted funding linked to sustainability-related KPIs
Where: Broxbourne and the wider south east Hertfordshire area
When: Loan announced September 2023
Why: Financial support for both retrofitting and the delivery of new, more efficient homes

The challenge

The UK Government is aiming for 300,000 homes to be built each year from the mid-2020s in order to meet the needs of a growing population. A significant proportion of these homes will need to be affordable and all of them will need to support the delivery of decarbonisation in line with binding carbon budgets.

At the same time, existing buildings will need to be retrofitted to lower bills, improve living conditions and align the UK’s building stock with net-zero by 2050. The UN estimates that 80% of the buildings that will stand by mid-century already exist.

The solution

B3Living is already contributing to efforts to grow the UK’s affordable housing stock. It has around 5,000 homes and is aiming to deliver 500 more by the end of 2024.

To support the delivery of these homes while ensuring that environmental sustainability remains top-of-mind for executives, the firm has agreed to its first sustainability-linked loan in partnership with Lloyds Bank. The loan offers discounted funding provided that B3Living meets key green targets.

How the project works

B3Living will receive discounted funding relative to its performance against three KPIs.

The first KPI relates to retrofitting existing stock. B3Living will strive to bring all of its existing properties up to Energy Performance Certificate (EPC) grade C or higher by 2028. At present, only around 40% of all homes in England meet this level of energy performance.

Secondly, B3Living is working to improve its SHIFT sustainability framework score. SHIFT is an environmental performance assessment for building owners and managers. It has proven very popular with social housing operators and covers 21 different topics in its assessment.

Currently, B3Living is ranked as SHIFT ‘Silver’ overall. It is aiming to achieve a ‘Gold’ rating in 2024 and continue improving its score each year thereafter.

The last KPI relates to delivering energy-efficient new builds. B3Living will need to build at least 50 homes to enhanced EPC standards annually by 2028. The majority (70%) will be in Broxbourne.

B3Living was advised by the banking team at law firm Winckworth Sherwood in agreeing on the sustainability-linked loan.

The results

This is a new project so data on the results so far are not yet available.

Business benefits

B3Living’s executive director for finance, Alex Sherlock, said the loan will enable the firm to protect its financial resilience while also continuing to grow as planned. At the same time, it will encourage the leadership to “stretch their ESG ambitions”.

Lower energy bills for customers are expected to result from both the retrofitting and from building new homes to higher energy efficiency standards. This is a strategic priority for B3Living as the energy price crisis rolls on.

Ensuring higher energy efficiency standards will also help B3Living get ahead of the curve in terms of changing legislation and regulation. The UK Government is aiming for all homes to be EPC ‘C’ grade or higher by 2035. In 2025, it will introduce a Future Homes Standard, mandating that new-build homes meet strict requirements on operational emissions. This is without mentioning the binding 2050 net-zero target and interim carbon budgets


This is a new project so data on the savings/business benefits are not yet available.

Industry context

As noted above, housing developers are required to prepare for some significant policy and regulatory changes relating to energy efficiency and emissions. This is a key part of the net-zero transition, given that around 17% of the UK’s annual national carbon footprint is attributable to operational emissions from buildings – mainly from heating and cooking.

The Climate Change Committee’s (CCC) summer 2023 progress report to Parliament confirmed that slow decarbonisation of the UK’s housing stock was undermining the net-zero transition and also locking homeowners and tenants into high energy bills. There is clearly a need for businesses to move ahead of policy, providing Ministers with permission to be more ambitious.

Regarding the broader green corporate finance context, PwC estimates that around $600bn of sustainability-linked loans were issued in 2022. Loans have, to date, tended to be large and have benefitted larger companies. The B3Living example is one of many with a smaller figure, for a firm that is not a multinational conglomerate.

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